* C$ dips to $1.0132
* Bond firm across curve on Libya revolt
TORONTO, Feb 22 Canada's dollar was slightly softer against the U.S. currency on Tuesday morning ahead of domestic retail sales figures, which will help firm expectations of how the economy fared in the fourth quarter.
Canadian retail sales data for December, due at 8:30 a.m. (1330 GMT), is the main domestic economic figures for the week. Economists polled by Reuters expect a flat reading for December compared to a 1.3 percent jump in November. Excluding autos, retail sales are expected to rise 0.6 percent.
"It seems that there is probably a greater propensity to sell on bad news than there is to buy on good news, until we get a shift from the Bank of Canada in terms of tone," said Sacha Tihanyi, currency strategist at Scotia Capital.
The data is also one of the last key pieces of data ahead of the Bank of Canada's March 1 policy-setting decision.
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. [ID:nTZOIDE7P7]
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.
Bank of Canada Governor Mark Carney suggested on the weekend his 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]
At 8 a.m. (1300 GMT), the currency CAD=D4 was at C$0.9870 to the U.S. dollar, or $1.0132, down slightly from Friday's North American session close at C$0.9860 to the U.S. dollar, or $1.0142. Most Canadian financial markets were closed on Monday.
Canadian government bonds were firmer across the curve as risk sentiment took a hit from the disruption in Libya, driving down world stocks.
Libyan leader Muammar Gaddafi signalled 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 two-year Canadian government bond CA2YT=RR up 6 Canadian cents to yield 1.858 percent, while the 10-year bond CA10YT=RR advanced 49 Canadian cents to yield 3.408 percent.
(Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)