Consumption was strong, with consumer spending up 3.2 percent and advance sales growing by 3 percent. A drawdown in inventories weighed on the overall figure.
Read MoreEuro-dollar going to 1.20, not parity: Strategist
"I think that the number, while weak, may not be meaningfully weak enough to reduce the risk of a Fed rate hike in December," said Omer Eisner, chief market analyst at Commonwealth Foreign Exchange Inc. He added that the Nov. 6 release of job growth figures would be more important for markets.
The dollar index, which measures the greenback against six major currencies, was down 0.53 percent at 97.27.
The euro was stronger against the dollar, rising to $1.0977, after falling on Wednesday to its lowest since August. The dollar was flat against the Japanese yen at 121.09.
China's decision to change its 35-year-old one-baby policy had a short but noticeable impact on the markets, with the China-linked New Zealand dollar jolting upward before reversing course and falling 0.2 percent.
Win Thin, global head of emerging markets at Brown Brothers Harriman, said he believed the new policy would benefit China and trading partners like New Zealand in the long term since bigger families in China would result in more spending, and therefore more trade.
"I think if you look at the New Zealand dollar, it might have had a pop on that news, but it's pretty much worn off now," he said. "That (policy decision) will help New Zealand, but this is going to take decades to have an impact."