CANADA FX DEBT-C$ buoyed by retail sales, U.S. budget hopes

* C$ ends at C$0.9873 vs US$, or $1.0129
    * Canada October retail sales stronger than expected
    * Bond prices little changed across curve

    By Claire Sibonney
    TORONTO, Dec 20 (Reuters) - Canada's currency perked up against the U.S.
dollar on Thursday after two days of losses, lifted by stronger-than-expected
domestic retail sales and some optimism that U.S. politicians would keep working
to break the federal budget logjam.
    Canadian retail sales in October jumped by a much higher-than-forecast 0.7
percent from September to hit a record, but some analysts said the figures would
not do much to boost recent sluggish economic growth. 
    "The very strong retail sales this morning in Canada has probably been
supporting the Canadian dollar, but I don't think it's something that's
sustainable," said Charles St-Arnaud, Canadian economist and currency strategist
in New York.
    "The Canadian dollar is stronger than what it should be given where
commodity prices are," he said.
    St-Arnaud also noted that the differential between the price at which
Canadian producers are selling their oil and the price at which Canadian
refiners have to import oil is close to a record high around $50 a barrel.
    Investors clung to hope for a U.S. budget agreement after Republican House
Speaker John Boehner pledged to keep working on a solution to the "fiscal
cliff", while he continued to criticize President Barack Obama's approach to
budget talks.
    The Canadian dollar ended the North American session at C$0.9873 versus the
U.S. dollar, or $1.0129, stronger than Wednesday's finish at C$0.9881, or
    "As we get closer to this 'fiscal cliff,' the market is even more singularly
focused on that issue," said Greg Moore, FX strategist at TD Securities,
referring to the U.S. talks to avert steep tax hikes and spending cuts that
threaten recession and that are due to take effect automatically in January.
    Boehner's "Plan B" to limit income-tax increases to the wealthiest sliver of
the population appeared likely to pass the House on Thursday evening after it
narrowly cleared a procedural hurdle in the afternoon. On Wednesday, Obama
threatened to veto the Republican measure. 
    Moore noted near-term U.S. dollar resistance versus Canada around C$0.9900
and support around C$0.9825-30.
    The market barely reacted to a round of strong U.S. data, including on gross
domestic product growth and housing. 
    Canadian government bond prices were little changed across the curve. The
two-year bond was up 2 Canadian cents, yielding 1.133 percent, while
the benchmark 10-year bond lost 4 Canadian cents to yield 1.849