The Canadian dollar rebounded against its U.S. counterpart on Wednesday from a one-month low hit the day before, driven by a broad-based retreat in the U.S. dollar on the back of Federal Reserve concerns over inflation.

Investors were also following North American Free Trade Agreement renegotiation talks, which kicked off on Wednesday, but an overall dearth of domestic news meant the loonie took its cues elsewhere.

Minutes from the U.S. central bank's July meeting showed policy makers were increasingly worried about a recent streak of soft inflation readings, raising the possibility the Fed could hold off raising interest rates.

"The outlook for interest rate hikes, while still pretty much on course, is causing a little bit of uncertainty to creep into the market," said Rahim Madhavji, President at KnightsbridgeFX.com.

"I think the U.S. dollar rally popped a while ago. We're going to see the USD/CAD oscillate around where we are."

At 4:00 p.m. ET, the Canadian dollar was trading at $1.2627 to the greenback, or 79.20 cents US, up one per cent.

The currency traded in a range of $1.2614 to $1.2770.

On Tuesday, the loonie hit its lowest level since July 12 at $1.2778, pressured by broader gains for the greenback as North Korea tensions eased and data showed a jump in U.S. retail sales.

The U.S. dollar fell to session lows against a number of currencies, extending earlier losses after the disbanding of U.S. President Donald Trump's manufacturing council and strategic policy forum.

"There's a little bit of uncertainty with Trump: his ability to implement his agenda, the noise around it, how that may or may not impact the Fed," said Madhavji.

The loonie's rally came even as prices of oil, one of Canada's major exports, slumped more than 1.5 per cent following data that suggested U.S. production was edging higher, stoking renewed worries about a global crude glut.

Foreign investors sold a net $923 million in Canadian securities in June after buying $29.44 billion in securities in May, Statistics Canada said. It was the first monthly divestment since July 2015.

Canadian government bond prices were higher across the yield curve, with the two-year price up two cents to yield 1.233 per cent and the benchmark 10-year rising 31.5 cents to yield 1.871 per cent.

Canada's closely watched inflation data for July is due on Friday.