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* C$ steady at $1.0142
* Bonds firm across curve on Libya revolt
* Canada Dec retail sales down, first in 7 months (Adds details)
By Ka Yan Ng
TORONTO, Feb 22 (Reuters) - Canada's dollar was little changed against the U.S. greenback on Tuesday after unexpectedly weak domestic retail sales data, with a Libya-inspired surge in the price of oil providing support.
Canadian retail sales fell 0.2 percent in December, but November's strong growth was revised up by the same amount, Statistics Canada said. [ID:nN22272852]
The report, the only major domestic release for the week, is one of the last key pieces of data ahead of the Bank of Canada's March 1 policy-setting decision.
"It was a little bit weaker than expected but the market has got bigger fish to fry," said Doug Porter, deputy chief economist at BMO Capital Markets.
"On balance, the retail sales were a tad disappointing, especially on the headline. Ex-autos, it wasn't very much of a surprise and we did get a small upward revision to the prior month."
Excluding auto sales, which were down 2.8 percent from November, retail sales rose by 0.6 percent, as expected. A Reuters survey of analysts had predicted no change for overall retail sales. ECONCA
Riskier assets backpedaled on Tuesday as Libyan leader Muammar Gaddafi signaled defiance of a mounting revolt against his 41-year rule on Tuesday, appearing on state television and denying he had fled the country. [ID:nLDE71L1CD]
The turmoil in Libya drove oil prices to 2-1/2 year highs, prompting fears of disruption to global economic growth. The focus on Libya also put pressure on world stocks and lifted government bond prices. [MKTS/GLOB]
But soaring oil -- U.S. crude was up about 7 percent -- was supportive to Canada's currency, keeping it locked in recent ranges after reaching as high as C$0.9823 to the U.S. dollar, or $1.0180, overnight.
"You would expect the Canadian dollar to be softening but because of Canada's large net exports of oil, the dollar is hanging in there," said Porter.
At 9:25 a.m. (1425 GMT), the currency CAD=D4 was at C$0.9860 to the U.S. dollar, or $1.0142, exactly the same as Friday's North American session close. Most Canadian financial markets were closed on Monday.
FLIGHT TO SAFETY
Canadian government bonds were firmer across the curve in a flight to safer assets as risk sentiment took a hit from the disruption in Libya.
The weaker-than-expected retail sales data also helped, suggesting there is little pressure on the Bank of Canada to quickly resume its rate-hike campaign.
None of the 12 primary dealers surveyed by Reuters last week expect the Bank of Canada to hike rates in March, with most still calling for an interest rate increase in the first half of the year. May was seen as the most likely month for the next central bank tightening. [CA/POLL]
Canada's unexpected trade surplus in December after nine months of deficits was one of the factors contributing to a more upbeat outlook on the economy. However, the retail sales data suggested the outlook is more mixed.
Bank of Canada Governor Mark Carney suggested on the weekend the central bank's projection in January of 2.3 percent annualized growth in the fourth quarter could be tweaked higher after growth came in at a disappointing 1 percent in the third quarter. [ID:nN19302110]
The two-year Canadian government bond CA2YT=RR rose 8 Canadian cents to yield 1.850 percent, while the 10-year bond CA10YT=RR advanced 46 Canadian cents to yield 3.412 percent. (Editing by Jeffrey Hodgson)