The Canadian currency touched C$1.0366 against its US counterpart, or 96.47 US cents, its weakest since Dec. 20.
The commodity-linked currency weakened after US data suggested the labor market recovery there was stalling after a strong performance early in the year. Data showed private payroll growth accelerated only a tad last month, while claims for jobless benefits rose last week.
The data comes ahead of Friday's key US payrolls report.
Markets were also disappointed by data that showed US first-quarter growth was revised down and Midwest business activity slowed considerably.
Overseas, worries about Spain's banks and Greece's survival in the euro area pushed the euro to a two-year low against the dollar.
Meanwhile, the S&P 500 and S&P/TSX composite index both fell and notched their worst month since September.
David Bradley, director of foreign exchange trading at Scotiabank, said recent weakness in equities fueled investor appetite for greenbacks.
"The buying interest is a function of the fact that the equity markets came off so much this month so for rebalancing purposes a lot of funds buy US dollars," he said.
"It's month-end flows for sure and general US dollar strength across the board. The dollar is a safe haven these days with all the trouble in Europe."
The Canadian dollar ended at C$1.0329 against its US counterpart, or 96.81 US cents, down from Wednesday's North American session close at C$1.0292 against the US dollar, or 97.16 US cents. For the month, the currency shed around 4 percent, according to Thomson Reuters data.
"Risk sentiment just continues to plunge by the day," said Mazen Issa, Canada macro strategist at TD Securities. "Things were holding in fairly steady until equities opened and you saw the Canadian dollar just drop."
Issa sees the Canadian dollar weakening beyond C$1.04 should Friday's Canadian GDP data and US nonfarm payroll report dismay markets. In the near term he said the currency should hover between C$1.03 and C$1.04 versus the greenback.
Headlines out of Europe on Thursday did not help broader confidence. The Canadian dollar underperformed most of its G10 currency peers including the Australian and New Zealand dollars.
On Wednesday, the Canadian dollar had firmed to a 2012 high of C$1.2721 against the euro.
Canadian government bond prices edged higher across the curve, sending longer-dated yields to record lows. Canada's benchmark 10-year bond yield hit a record trough of 1.711 percent, while the 30-year yield touched a record low of 2.276 percent.