Growth in China's industrial output fell to a 17-year low in the first two months of the year and the jobless rate rose, reflecting further weakness in the world's second-biggest economy.
"The (US) dollar had been firmer overnight on the weaker-than-expected Chinese data. That's really been dragging other developed market currencies lower," said Bipan Rai, North America head of FX Strategy at CIBC Capital Markets.
US President Donald Trump and Treasury Secretary Steven Mnuchin said discussions with China to end a months-long trade war were progressing quickly, though Trump could not say whether a final deal would be reached.
"If things do go sour in regards to China-US negotiations, commodity currencies like the loonie will be hit," Rai said.
The trade talks and global economic growth also weighed on the price of oil, one of Canada's major exports. Still, US crude oil futures settled 0.6 percent higher at $58.61 a barrel.
At 3:44 p.m. (1944 GMT), the Canadian dollar was trading 0.2 percent lower at 1.3323 to the greenback, or 75.06 US cents. The currency touched its strongest intraday level since March 4 at 1.3287.
The loonie fell as Statistics Canada data showed the ratio of Canadian household debt to income widened to a record 174.0 percent in the fourth quarter.
New home prices in Canada edged down 0.1 percent in January, following five unchanged months in a row, separate data showed.
Bank of Canada Senior Deputy Governor Carolyn Wilkins is due to speak later Thursday. The central bank will release her prepared remarks at 6:50 p.m. EDT (2250 GMT).
Last week, the central bank said it expected the Canadian economy to be weaker in the first half of 2019 than it projected in January.
Still, the Bank of Canada is unlikely to cut interest rates to support a flagging economy as long as job growth remains robust, an analysis of the central bank's response to past divergences in economic data suggests.
Canadian government bond prices rose across much of the yield curve, with the 10-year up 7 Canadian cents to yield 1.758 percent.