Sterling was the other big mover, adding more than half a percent on hopes UK lawmakers will vote against a no-deal Brexit later in the day. Foreign exchange markets elsewhere were mostly quiet, with investors reluctant to take risks as the cautious mood in Asia spread to Europe.
A measure of Australian consumer confidence slumped to its lowest in over a year in March, adding to recent signs of weakness in the economy. The Aussie has been sensitive to signs of a loss of economic momentum, particularly after the Reserve Bank of Australia's upbeat outlook last week failed to dispel bets it would have to lower rates eventually.
The Aussie fell half a percent to as low as $0.70495, although the currency was above two-month lows of $0.7003 hit last week. It had recovered to $0.70635 by 1000 GMT. "Yields have come off, stockmarkets are in the red and in FX land, USD and JPY (Japanese yen) are outperforming at the expense of AUD and NZD (New Zealand dollar), particularly after softer domestic data," said Sue Trinh, an analyst at RBC Capital Markets.
Trinh said the weak March consumer confidence data in Australia highlighted "continued weakness in consumer spending", and especially a slowdown in the country's property market. The New Zealand dollar, which often tracks the Australian currency because the two economies are closely linked, also fell, by 0.3 percent to $0.6837.
The euro made a small move upwards after better-than-expected euro zone industrial production numbers for January. The single currency rose 0.1 percent to as high as $1.13. The U.S. dollar index was slightly lower, at 96.899 against rival currencies.
Tuesday's softer-than-expected U.S. February inflation data and falling U.S. government bond yields have dented dollar demand, analysts said. MUFG analysts noted that euro/dollar had "fully reversed last week's sell-off following the dovish ECB (European Central Bank) meeting".
Prime Minister Theresa May lost a second attempt on Tuesday to get her Brexit withdrawal agreement passed by parliament, but the currency's losses have been tempered because most investors are confident Britain will avoid a disruptive Brexit and instead seek to postpone a March 29 departure date from the European Union. The pound has had a rollercoaster ride this week, its range varying 3-1/2 cents against the dollar.
(Editing by Mark Potter and Edmund Blair)