CANADA FX DEBT-C$ stronger, but domestic and European concerns linger

* C$ at C$1.0243 vs US$, or 97.63 U.S. cents
    * Retail sales rise by 1 pct but volumes flat
    * C$ seen trading between C$1.0180 and C$1.03 in coming days
    * C$ touches weakest level against AUD in more than a year
    * Bond prices rise across curve

    By Alastair Sharp
    TORONTO, March 21 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Thursday, helped in part by a
surprisingly strong reading of economic growth out of New
Zealand, while Canadian retail sales and worries about Cyprus
tempered gains.
    Retail sales were weaker than the initial headline
indicated, analysts said, noting that while sales climbed by 1
percent in January, that followed a revised 2.3 percent drop in
December. In volume terms, used for calculating real GDP growth,
sales were flat. 
    "The anticipation that it would be a big rebound was offset
to some degree by the revision that was lower for December,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
    The currency's commodities cousins, the Australian and New
Zealand dollars, were both stronger overnight, with Australia
also firmer on a surprisingly upbeat report on manufacturing in
China, Australia's biggest export market.  
    "Risk held up okay overnight. (New Zealand's GDP) was
helpful. The kiwi dollar was the strongest performer overnight.
It seems to be helping most of the commodities-based currencies
as well and Canada's coming along for the ride," said Mark
Chandler, head of Canadian fixed income and currency strategy at
Royal Bank of Canada.
    "Our own data really, even though it looks good on the
surface, the guts to the report aren't that encouraging."
    At 3:19 p.m. (1919 GMT), the currency was trading at
C$1.0243 versus the U.S. dollar, or 97.63 U.S. cents, slightly
stronger than its North American session close on Wednesday of
C$1.0254, or 97.52 U.S. cents. 
    Worries about how Cyprus' banking crisis may affect other
indebted euro zone countries also unnerved investors.
    The European Union gave Cyprus until Monday to raise the
billions of euros it needs to secure an international bailout or
face a collapse of its financial system that could push it out
of the euro currency zone. 
    "A move out of the euro zone by Cyprus is likely to filter
into the market psyche, from a risk perspective, and that likely
is going to equate to some weakness in the Canadian dollar,"
National's Spitz said, although he noted that the link between
risk appetite and the Canadian dollar has eroded somewhat.
    Canada's performance was mixed against other major
currencies. It was stronger against the euro, but
weaker versus the Japanese yen. It touched its weakest
level against the Australian dollar in more than a
    In other data, the number of Americans filing new claims for
jobless benefits edged higher last week, but a trend reading
dropped to its lowest in five years and pointed to ongoing
healing in the labor market. 
    Canada's dollar is likely to trade between C$1.0180 and
C$1.03 in coming days, Spitz said.
    Canadian government bond prices were higher across the
curve, with the two-year bond up almost a Canadian
cent to yield 0.986 percent, while the benchmark 10-year bond
 climbed 34 Canadian cents to yield 1.826 percent.