The loonie finished the day down 0.95 of a cent to 97.17 cents US as the U.S. dollar also gained strength against other major currencies.
The Canadian dollar was as low as 96.96 cents at one point in the morning, a level not seen in more than two months.
Statistics Canada said the annual inflation rate plunged six-tenths of a point to 0.4 per cent, the lowest it's been since October 2009 as gasoline prices fell six per cent from last April.
Jason Hornett, a portfolio manager with Bissett Investment Management, said the low inflation numbers may have left some investors debating whether the Bank of Canada will step in and cut interest rates.
"If we did see traders taking up the expectation that Canadian interest rates would be declining, it would make our dollar less attractive," he said.
"However, given the current level of interest rates... they're at historical low levels, so I really doubt whether we're going to see another cut for interest rates in Canada."
On a month-to-month basis, Statistics Canada said gasoline, clothing, restaurant meals, furniture and mortgage interest costs were all lower last month than they were in March.
But the Bank of Canada's core inflation index, which excludes volatile items such as gasoline, just managed to stay within the central bank's desired one-to-three range, falling only three-tenths of a point to 1.1 per cent.
Meanwhile, gold prices continued to pull back. June gold bullion dropped $22.20 to US$1,364.70 an ounce, nearing its low of US$1,352 from April 15 after a two-day plunge knocked $200 off its price.
Hornett said as the stock markets rise, traders will no longer be eyeing gold as a good investment.
"I think that people's expectations for the economy both in North America and globally just continues to improve, so that continues to reduce risk of a any sort of meltdown which makes the gold trade less and less attractive," he said.
The June crude contract was up 86 cents to US$96.02 a barrel and July copper climbed three cents to US$3.32 a pound.