The loonie tumbled 0.7 of a cent to 88.45 cents US.
Market volatility was reflected in the benchmark 10-year U.S. Treasury, which fell to 2.2 per cent late Tuesday from 2.3 per cent on Friday.
"Markets have dramatically shifted course over the last week, driving volatility substantially higher, on the back of a deceleration in the outlook for global growth and inflationary pressure," said Camilla Sutton, chief FX strategist and managing director at Scotiabank Global Banking and Markets.
Financial markets have been buffeted by worries about deteriorating economic strength practically everywhere except the United States.
Last week, disappointing German data detailing big declines in exports, factory orders and production, raised worries that Europe's economic powerhouse could fall back into recession.
There was further negative data Tuesday as the German government slashed its growth forecast for this year and next, deepening worries that Germany could slip into recession. The German Economy Ministry has cut this year's growth figure to 1.2 per cent from 1.8 per cent earlier this year and next year's to 1.3 per cent from two per cent.
Concerns about the global economy were also elevated after the International Monetary Fund downgraded its economic forecast.
At the same time, the Canadian dollar has been under pressure from oil prices, which have fallen to mid-2012 lows.
Oil prices continued to decline Tuesday, with the November contract in New York down $3.90 to US$81.84 a barrel, its lowest level since mid-June 2012, after the International Energy Agency slashed its oil-demand growth forecast for this year by more than a fifth because of weakening growth.
December copper was up five cents to US$3.09 a pound while December gold bullion gained $4.30 to US$1,234.30 an ounce.
Chinese growth has also been a worry as traders failed to find reassurance from the country's top economic planner that major water conservancy projects and other infrastructure investment will help ensure China meets its economic growth target of 7.5 per cent for the year. Last week, the IMF said it expected the world's second-biggest economy to grow by 7.4 per cent this year.Suggest a correction