* Ends at C$1.0482 vs US$, or 95.40 U.S. cents
* Notches biggest monthly drop since October 2008
* Month-end, quarter-end flows boost volatility
* Bond prices rally across curve
By Andrea Hopkins
TORONTO, Sept 30 (Reuters) - The Canadian dollar hit fresh 12-month lows against the U.S. dollar on Friday to notch the largest monthly drop in value since the height of the 2008 financial crisis as global growth concerns dominated.
Global stocks were set to close their worst quarter in nearly three years, weighed by nagging concerns about the world economy and the lack of a credible solution to Europe's debt crisis, The euro and most commodity prices also fell as investors' search for safety drove up U.S. government bonds and the dollar. [MKTS/GLOB]
Adding to a string of global data that has crushed growth-related assets in the past three months, China's manufacturing sector contracted for a third straight month in September while German retail sales slid at their sharpest pace in more than four years. [ID:nL3E7KU097] [ID:nL5E7KU0BD]
The gloom helped push the Canadian dollar more than a cent lower to hit its weakest point since September 2010. Based on Bank of Canada closing levels, the currency lost 6.6 percent in September -- the biggest monthly drop since October 2008 -- and nearly 8 percent in the third quarter.
"The high correlation with weakening commodities and overall global growth concerns are hurting the Canadian dollar. Now it's a bit of a snowball effect with people getting out of longer-term positions as well and seeking safe haven in U.S. dollar," said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
The Canadian dollar CAD=D3 ended the session at C$1.0482 to the U.S. dollar, or 95.40 U.S. cents, down from Thursday's North American close at C$1.0366 to the U.S. dollar, or 96.47 U.S. cents.
The currency at one point hit C$1.0504, or 95.20 U.S. cents, its weakest level since Sept. 8, 2010.
The currency, which slipped below parity with its U.S. counterpart last week and has continued to lose ground since, was also under pressure from month-end and quarter-end rebalancing by institutional investors who suffered stock market losses in the quarter.
"The month-end rebalancing flows took their toll on other currencies as well. Aussie, Canada and Kiwi -- the traditional risk/commodity currencies -- are taking the brunt of the punishment here," Curran said.
Jack Spitz, managing director of foreign exchange at National Bank Financial, said the weakness of the Canadian currency was more a story about the strong U.S. dollar than anything specific to Canada, which has been a relative bright spot in the global economy.
"The market, by and large, has been buying the (U.S.) dollar and if you look at the relative performance of the three biggest influences on the Canadian dollar -- equities, commodities and overall volatility -- they are all moving in a similar direction, and it is all negative for the C$," he said.
Economic data out of Canada and the United States had little market impact, with global focus mostly fixed on the European debt crisis.
The Canadian economy grew in July, the second straight month of expansion, setting the stage for a positive third quarter after the second-quarter's worrying contraction. [ID:nS1E78T044]
Bond prices marched higher across the curve. The two-year Canadian government bond CA2YT=RR was up 11 Canadian cents to yield 0.887 percent, while the 10-year bond CA10YT=RR gained 61 Canadian cents to yield 2.153 percent. (Editing by Jeffrey Hodgson)