July's reading was the weakest since January. Economists polled by Reuters had forecast retail sales increasing 0.2 percent last month.
Higher interest rates tend to boost the dollar's allure because they mean more attractive yields for some U.S. assets.
The euro last just below $1.34, up about 0.2 percent.
Earlier, the euro was held back by euro zone data that showed factory output fell 0.3 percent in June after a 1.1 percent drop in May.
Sterling, meanwhile, fell after a Bank of England report forecast subdued growth in wages in coming months, leading markets to push back until early next year expectations of higher interest rates.
The British pound fell to a 10-week low against the dollar to above $1.68, a far cry from its July peak near $1.72 which was its highest level since late 2008. It also fell against the euro, with the single currency rising by 0.3 percent to trade near 80 pence.
Japan's economy shrank an annualized 6.8 percent in the second quarter, data showed on Wednesday, its biggest contraction since the March 2011 earthquake and tsunami, as a sales tax hike took a heavy toll on household spending.
The annualized contraction in gross domestic product was slightly less than forecasts for a 7.1 percent drop. But it will keep pressure on policymakers to ease policy in coming months, to ward off any risk of a prolonged slowdown caused by the tax increase.
The yen showed limited reaction to the data initially but fell in European trade. The dollar was last up 0.1 percent above 102 yen, having traded roughly between 103 yen and 101 yen over the past couple of weeks.