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Dollar steadily lower after Beige Book release

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The dollar traded lower against the euro on Wednesday after the Federal Reserve said U.S. economic growth remained tepid.

Economic activity expanded at a "modest" to "moderate" pace over thepast few months, the Fed said in its Beige Book report Wednesday.

While the effect of lower gas prices remains mixed, consumerspending did rise in most areas. Commercial and residential real estate pricesare higher and loan demand is on the rise as well.

Earlier, the greenback hit its lowest against the euro in over two weeks after the European Central Bank kept monetary policy steady despite recent market volatility and Bund yields extended their rise.

The ECB sees no reason to adjust its monetary policy stance in response to a recent rise in bond yields in Europe, ECB President Mario Draghi told a news conference after the bank held interest rates as expected.

"The ECB's not currently considering trying to increase monetary policy stimulus. They're not worried about volatility," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.

The ECB's 1-trillion euro stimulus program typically has a weakening effect on the euro. The euro has notched gains in the past two sessions, however, by tracking a rise in Bund yields. Benchmark 10-year Bund yields hit 0.89 percent Wednesday, their highest since October 2014.

Analysts said the initial rise in Bund yields came after data on Tuesday showed a rise in euro-zone inflation in May. The rise in Bund yields has triggered greater demand for European assets, thus fuelling the euro's gains, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

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The euro was last up 1.02 percent against the dollar at $1.1266, hovering near a more than two-week high of $1.1286, after posting its second biggest daily gain since October 2011 on Tuesday.

Comments from Federal Reserve board member Lael Brainard that the U.S. economy's recent poor performance might be more than transitory also weighed on the dollar on Tuesday.

The dollar rose slightly against the yen at 124.32 yen, and rose against the Swiss franc at 0.9351 franc after mixed U.S. economic data. The dollar index, which measures the greenback against a basket of major currencies, was on track for a second straight losing session.

Data showed the U.S. trade deficit narrowed in April, while companies picked up their hiring in May. ISM data showing the pace of growth in the U.S. services sector slowed in May weighed on the dollar, however.

"It may kind of fan some fears that the Spring recovery is not materializing," said Commonwealth's Esiner. "That could ultimately postpone any move by the Fed," he said, referring to a Federal Reserve rate hike, which is expected to boost the dollar by driving investment flows into the United States.

The dollar index was last down 0.4 percent at 95.45.

—CNBC's Jeff Cox contributed to this report.