The loonie closed down 0.55 of a cent at 100.93 cents US.
American consumers spent less last month on autos, clothing and furniture, leaving retail sales unchanged in August, the U.S. Commerce Department said.
It also said July was weaker than first thought.
The flat reading in August was a surprise given reports from retailers during the month that back-to-school shopping and auto sales appeared to have been strong compared with a year ago.
Other data from the U.S. showed companies paid the same amount for wholesale goods last month as a drop in energy prices offset higher food costs.
Excluding the volatile food and energy categories, core wholesale prices edged up 0.1 per cent, the smallest increase in three months. The figures indicate that inflation pressures are easing.
Investors also took in a report on Canadian capacity utilization, a measure of productivity, which fell slightly to 78.4 per cent in the second quarter from 79 per cent in the prior quarter.
Weaker commodity prices also put pressure on the loonie.
The October oil contract lost $1.30 to US$88.91 a barrel after the weak U.S. sales report. Weak retail spending suggests Americans will consume less fuel.
Copper shed seven cents to US$3.90 a pound. Gold futures fell $3.60 to US$1,826.50.
Colin Cieszynski, market analyst at CMC Markets Canada, said that with traders less likely to take on risk, the U.S. dollar has been strengthening and the loonie's fall below par with the American currency is a possibility.
"If the U.S. dollar continued to strengthen, it's possible the Canadian dollar could go through par, but it looks like it's holding for the near term."
In European economic news, Greece said the leaders of Greece, France and Germany stressed during an emergency teleconference that the debt-ridden country is an "integral" part of the eurozone, and that additional austerity measures Athens announced recently will ensure the country achieves its fiscal targets.
Fears that Greece was heading rapidly towards a chaotic default -- and the idea that it should potentially abandon the euro and return to its own currency -- have roiled markets for days, both across the 17-nation eurozone and globally.
Greek Prime Minister George Papandreou, German Chancellor Angela Merkel and French President Nicolas Sarkozy discussed the issue late Wednesday in Europe.
Moody's downgraded the credit ratings of French banks Societe Generale and Credit Agricole on Wednesday following a period of huge volatility in the markets as investors fretted about their exposure to Greek debt.
Some sort of move by Moody's had been widely expected this week since the agency had put them and rival BNP Paribas on review for downgrade in mid-June. But there had been fears that the downgrades would be even harsher.
In addition, the Italian government has passed a first vote on its austerity plan.