(Reuters) - The dollar lost ground on Wednesday as the release of minutes from the U.S. Federal Reserve's June meeting neared, with market players wary of hints of another round of asset buying in the coming months. The euro stayed weak on unease over how policymakers will tackle the debt crisis after it emerged there would be no quick judgment from a German court on the euro zone's bailout fund. It held above a two-year low against the dollar but remained vulnerable, dropping to a three and a half year low against the UK pound and a record low versus the higher-yielding Australian dollar. As well as the debt crisis doubts, the single currency was also further pressured by the European Central Bank's decision to cut interest rates last week, bringing the deposit rate to zero. The euro was up 0.3 percent against the dollar at $1.2283, still not far from Monday's two-year low of $1.2225. Its gains came as the index that measures the dollar's value against a basket of currencies .DXY lost 0.25 percent to 83.179. A break below Monday's low would open the door to a test of the June 2010 trough of $1.1875. The Fed minutes, due for release at 2:00 p.m. EDT, will throw more light on the central bank's plans after U.S. policymakers expressed different opinions on the need for more easing. "If we do get some announcement of more QE (quantitative easing) in the U.S. then it will provide support for euro/dollar and we could see a squeeze of short euro positions," said Paul Robson, currency strategist at RBS. "But the euro will stay weak on low yield, weak growth and debt uncertainty." Analysts said any renewed rise in Spanish and Italian government debt yields could push the euro down further as concerns about political hurdles and skepticism over the euro zone's decision-making process grow. The ECB's rate cut removed a pillar of support for the euro, raising chances it could become a funding currency of choice for buying higher-yielding assets. The euro fell to 78.84 pence against sterling, its weakest since late 2008, while it hit an all-time low against the Australian dollar of A$1.1960. The Australian currency also gained against the U.S. dollar, backed by its higher yields, with Australian interest rates at 3.5 percent. It was last up 0.8 percent at $1.0264. UNCERTAIN ROAD AHEAD Some market players had been hoping for a quick ruling from Germany's Constitutional Court on whether the European Stability Mechanism (ESM) and planned changes to the euro zone's budget rules were compatible with German law. But the decision looks likely to take several weeks, with Finance Minister Wolfgang Schaueble saying he hoped a judgment would be passed before the autumn. "People will be aware the non-decision we have got (from the court) might be a severe problem if yields really pick up and then euro/dollar will come under pressure," said Lutz Karpowitz, currency strategist at Commerzbank. There were also concerns about Italy, whose Prime Minister Mario Monti said on Tuesday the country could be interested in tapping the euro zone's rescue fund to ease its borrowing costs. The euro earlier fell to five-week low against the yen on EBS at 97.10 yen, before paring losses to last trade up 0.1 percent at 97.39. The dollar fell 0.2 percent against the yen to 79.25 yen but held above chart support at its 200-day moving average at 78.99, as investors awaited the outcome of the Bank of Japan's two-day policy meeting beginning on Wednesday. The BoJ is expected to hold off on easing monetary policy despite moves in that direction last week by the central banks of Europe, Britain and China.

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