The loonie was trading 0.4% lower at 1.2758 to the greenback, or 78.38 U.S. cents, the biggest decline among G10 currencies. It traded in a range of 1.2692 to 1.2766.
"The market took a classic risk-off turn in the aftermath of the FOMC minutes," said Adam Button, chief currency analyst at ForexLive.
U.S. stocks ended down sharply as minutes from the Fed's December meeting signaled the central bank may have to raise interest rates sooner than expected.
Canada is a major exporter of oil and other commodities, so the loonie tends to be sensitive to moves in risk appetite.
U.S. crude oil futures pared earlier gains but still settled 1.1% higher at $77.85 a barrel.
Meanwhile, domestic data showed that the value of building permits increased by 6.8% in November from October.
Canada's employment report for December, due on Friday, could offer further clues on the strength of the domestic economy.
Canadian government bond yields rose across the curve, tracking the move in U.S. Treasuries.
The 10-year touched its highest level in more than five weeks at 1.643% before dipping to 1.636%, up 4.6 basis points on the day.
(Reporting by Fergal Smith; editing by Barbara Lewis and Marguerita Choy)
By Fergal Smith
