Dollar lower on FOMC minutes

The dollar weakened against a basket of currencies on Wednesday as a record of the Dec. 15-16 meeting from Federal Reserve policy-makers supported bets further U.S. rate hikes would be gradual on concerns about persistent low inflation.

Members of the Federal Open Market Committee, the Fed's policy-setting group, unanimously voted to increase U.S. rates for the first time in nearly a decade last month due to an improving labor market.

The dollar index that measures the greenback against a group of six currencies was last down 0.1 percent at 99.303 following the release of the FOMC minutes.

Earlier, the yuan fell to its lowest since the 2010 opening of its offshore market on worries about the Chinese economy.

Further losses across global stock markets stoked bids for the low-risk Japanese yen, which hovered near a three-month high versus the greenback and a nine-month peak against the euro.

The yuan's depreciation "does look like it's contributing to the overall cautious market mood," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

Despite market turbulence since the start of 2016 and data that signaled cooling in U.S. business activities, a top Federal Reserve official said the central bank remains on track for four more rate increases in 2016.

"My view is that those numbers are in the ballpark," Fed Vice Chairman Stanley Fischer told CNBC.

The dollar index, which measures the greenback against a group of six currencies, was 0.26 percent lower at 99.14, a shade below the one-month peak set on Tuesday.

Sharp stock market losses in first three trading days of 2016 due to worries about the world's second-biggest economy unleashed a safe-haven scramble for the yen.

"Everyone has been taken by surprise by the scale of the volatility this week. It's all driven by China," said Gian Marco Salcioli, head of FX sales at Italy's Intesa Sanpaolo Banca IMI in Milan.

Adding to the mix were reports of a possible nuclear test in North Korea, helping push the yen higher against the dollar.

The greenback fell 0.59 percent to 118.44 yen, while the euro slipped 0.15 percent to 127.80 yen.

Investors were spooked by the rapid weakening of the Chinese currency, which fell almost 2.5 percent in just three days. That almost matched August's one-off devaluation, which touched off a global stock market selloff.

After the People's Bank of China again fixed its onshore rates for the yuan lower, the less-regulated offshore rates for the currency fell more than 1 percent against the dollar to a record low of 6.7315.

The Australian and New Zealand dollars, among those most sensitive to Chinese growth and markets, have tumbled on the back of the weakening yuan.

The Aussie was down 1.5 percent at $0.7059 after hitting its lowest in eight weeks, while the Kiwi shed 0.9 percent at $0.6636 after touching its weakest in nearly a month.