The Canadian dollar shed 0.75 of a cent to 100.03 cents US, after earlier falling below parity to as low as 99.92 cents US as investors retreated to the perceived safety of the greenback.
That was a stark contrast to its closing Monday above 101 cents US.
It was the first time the loonie has fallen below parity since March 6.
Concerns about the manufacturing sectors in China and the eurozone sent investors to the greenback. That depressed commodity prices, which are denominated in the currency, as it makes them more expensive for holders of other currencies.
Gold bullion lost $7.80 to US$1,642.50 an ounce, while copper fell eight cents to US$3.77 a pound. Oil for May delivery was down $1.92 to US$105.35 on the New York Mercantile Exchange.
The catalyst in the flock to the greenback was a Chinese manufacturing index compiled by HSBC. Its main index fell to 48.1 in March from 49.6 in February. Figures below 50 indicate that manufacturing is contracting.
A similarly weak eurozone survey from financial information company Markit only added to concerns. Its composite purchasing managers' index, which combines both the services and manufacturing sectors, fell to a below-forecast 48.8 points in March from 49.3 the month before.
"Surprisingly weak PMI data from China and Europe has increased concerns over global growth and is weighing heavily on markets," Scotiabank wrote in its daily foreign exchange update.
"The reaction to China’s HSBC flash PMI was felt by the China and growth sensitive currencies like (Canada's)."
Earlier this week, soft Chinese housing data and a warning from miner BHP Billiton stoked concerns about the outlook in the world's second-largest economy, which has shored up the global economy over the past few years.
Meanwhile, Statistics Canada said the number of people receiving regular employment insurance benefits increased by 2.3 per cent or 12,400 in January to 561,100.
In another report, it said retail sales rose a modest 0.5 per cent against expectations for a 1.8 per cent gain, with sales excluding autos falling 0.5 per cent.
"Outside of the spirited gain in auto sales (a pace which cannot last long), Canadian retail sales continue to lose momentum. High household debt levels and weak employment growth suggest this trend will persist through early 2012," said Benjamin Reitzes, senior economist at BMO Capital Markets.
"With the final piece of January’s GDP puzzle in place—recall that wholesale trade and manufacturing volumes were lower—it looks as though the Canadian economy contracted slightly to start the year," he said.
However, the Conference Board of Canada said consumer confidence continued to rise in March, its third consecutive month of gains. The board's index of consumer confidence was up 4.3 points to 79.5, but most of the gains in March were due to a single factor — attitudes towards major purchases.
In the U.S, the Labour Department said Thursday that weekly applications dropped 5,000 to a seasonally adjusted 348,000, the lowest level since February 2008. The four-week average of applications, a less volatile measure, dipped to 355,000. That's also a four-year low.
The Conference Board in the U.S. said its measure of future U.S. economic activity rose 0.7 per cent in February. The increase pushed the index to its highest point since June 2008.