TORONTO: The Canadian dollar edged higher against its US counterpart on Wednesday, with the currency rebounding from an earlier one-week low as oil prices rose and the Federal Reserve hiked interest rates, as expected, for a second time this year.

The price of oil, one of Canada's major exports, turned positive after a bigger-than-expected decline in US crude inventories along with surprise drawdowns in gasoline and distillates indicated strong demand in the world's top oil consumer.

US crude oil futures settled 0.4 percent higher at $66.64 a barrel.

Federal Reserve officials saw the likelihood of two more interest rate increases for a total of four in 2018 based on a solid economic outlook.

"There was a lot of volatility in the markets with the Fed announcement," said Rahim Madhavji, President at Knightsbridge Foreign Exchange. "The Canadian dollar went for a bit of a ride."

At 5 p.m. EDT (2100 GMT), the Canadian dollar was trading 0.2 percent higher at C$1.2985 to the greenback, or 77.01 US cents. The currency touched its weakest intraday level since June 5 at C$1.3052.

"The Fed really isn't impacted by the trade noise that is going on in the market, Madhavji said. "The fact that it wasn't points to more potential weakness for the loonie."

Canadian Foreign Minister Chrystia Freeland said after talks with members of the US Senate Foreign Relations Committee on Wednesday that US trade actions against Canada are illegal under World Trade Organization rules.

US tariffs on Canadian steel and aluminum imports come amid slow-moving talks between Canada, the United States and Mexico to modernize the North American Free Trade Agreement (NAFTA). Canada sends about 75 percent of its exports to the United States, so its economy could be hurt if NAFTA were scrapped.

Canadian government bond prices were lower across a flatter yield curve in sympathy with US Treasuries. The 10-year fell 20 Canadian cents to yield 2.321 percent.