The loonie was lower for a fifth day, moving down 0.2 of a cent to 97.96 cents US after moving to an eight-month low of 97.51 cents US.
Retail sales fell more than expected in December, led by a decrease in vehicle sales.
Statistics Canada says sales declined 2.1 per cent in the final month of 2012, much more than the 0.3 per cent decline that economists had expected. The drop followed five consecutive monthly gains in retail sales.
Excluding sales at motor vehicle and parts dealers, retail sales decreased by 0.9 per cent.
"The holidays weren't very happy for retailers," observed CIBC World Markets economist Emanuella Enenajor.
Meanwhile, there was a small increase in the Consumer Price Index last month.
Statistics Canada says the CPI rose 0.5 per cent in January compared with a year earlier.
The agency said the main factor in the smaller increase in the CPI was gasoline prices, which fell 1.8 per cent year-over-year.
On a seasonally adjusted monthly basis, the CPI decreased 0.1 per cent in January after posting no change in December.
"Both these figures will play into the Bank of Canada’s thinking as the clock ticks down to their next (interest rate) meeting on March 6th," said Mark Chandler at RBC Dominion Securities.
"With growth in the fourth quarter now looking to be close to 0.5 per cent and disinflationary forces from economic slack weighing more heavily, it seems almost certain that the central bank will remove their tightening bias."
The loonie has shed about 1 1/2 US cents this past week due to a number of factors, including sliding commodities, worries about the strength of the Canadian housing sector and the price differential between benchmark Brent crude and Western Canadian Select from the oilsands.
Traders are also concerned about U.S. economic strength, particularly as a March 1 deadline looms when more than US$85 billion in across the board spending cuts will be triggered.
Markets have also been depressed this week over concerns the U.S. Federal Reserve may abandon its easy monetary policy sooner than many analysts have been predicting.
The release of minutes from the Fed's latest policy meeting showed that some policy-makers were worried that the bank’s US$85 billion in monthly bond purchases could eventually unsettle financial markets or cause the central bank to take losses.
The purchases, commonly known as quantitative easing, are designed to boost the U.S. economy by increasing liquidity in financial markets.
"So once you factor in all those things, there’s a lot of concern globally and that’s weighing heavily on the Canadian dollar," said Camilla Sutton, chief currency strategist at Scotia Capital.
The dollar hasn't closed above parity with the U.S. dollar since Feb. 7 and it's likely that the weakness in the loonie will persist for some time.
"I think that we’ve moved away from parity and it’s likely to continue to play out with a weaker Canadian dollar in the near term," added Sutton.
"And come year-end we’re likely to move a little closer to parity but probably not as much as our current forecast might suggest."
Commodity prices were lower on top of a string of steep losses.
Commodities have been punished by a U.S. dollar which strengthened after the release of the Fed minutes on Wednesday. Also, oil prices were undercut by data showing U.S. oil inventories rose last week by a much more than expected 4.14 million barrels.
The April crude contract on the New York Mercantile Exchange lost 29 cents to US$93.13 a barrel after tumbling about US$4 over the previous two sessions.
Gold was lower for a fourth day with the April contract down $5.80 to US$1,572.8 an ounce.
The latest declines in bullion prices were sparked by the Fed minutes because the central bank’s quantitative easing has supported gold. That is because the bond buying program has encouraged worries about rising inflation and gold is seen as a hedge against rising prices.
March copper was down two cents at US$3.53 a pound after losing almost 10 cents over the previous two sessions.
There are concerns about the health of the eurozone going into the weekend. This weekend’s Italian elections could stoke renewed worries over Europe’s’ debt crisis especially if there is a protracted period before a government is formed.