We were looking for a central hotel in sydney around 135usd. Also what area is central to stay in Sydney.
thanks.

www.wotif.com.au

If you can find a city map on the web (sorry, I don't have a URL to hand), roughly anywhere between Central Station (S) and Circular Quay (N), and between Darling Harbour (W) and Elizabeth Street (E) could be considered central. The further north the better from the viewpoint of access to the main tourist attractions, but of course that will affect prices. By the way, when checking prices, (to state the bleeding obvious I suppose) they won't be quoted in US$. US$135 = about AU$180. Don't overlook apartments. If you run a search on this forum you'll come up with some useful threads.

You may have to "up" your budget by a dollar or two, but for location AND anbience you could hardly do better than the Russell, which is one of the oldest and quaintest hotels in Sydney. It's also great value for money, especially if you leave the booking until 14 days before departure and book through www.wotif.com.

You can check out the Russell on http://www.therussell.com.au/. It's not a high-rise establishment, as you will see -- there isn't an elevator -- but you are right in the best part of Sydney.

Based on some recommendations on this forum and some of the travel books I was reading, we got a room at the Lord Nelson Brewery Hotel for $180 AUS per night. As Neil_Oz indicates, that would fit your budget. It's in the Rocks area. Again, no elevator, but it is a low rise hotel, so shouldn't be too bad.
http://www.lordnelson.com.au/

Lord Nelson is in The Rocks - and old part of town. I have never stayed there but they do brew their own beer which is very nice, and I have had a very nice ploughman's lunch there. It is easy walking distance to the harbour.