* C$ at C$1.0243 vs US$, or 97.63 U.S. cents * Retail sales rise by 1 pct but volumes flat * Federal budget has little effect on currency * C$ touches weakest level against AUD in more than a year * Bond prices rise across curve By Alastair Sharp TORONTO, March 21 The Canadian dollar firmed against its U.S. counterpart on Thursday, helped 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 the 1 percent rise in sales in January 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 loonie, as Canada's currency is colloquially known, brushed off the afternoon release of the federal budget, which kept a promise to erase the deficit before a 2015 election even as it found new cash for infrastructure and manufacturers. "What we've seen so far is as expected, no great surprises in terms of the fiscal numbers...even the downgraded (economic) numbers are no big surprise," Shaun Osborne, chief currency strategist at TD Securities, said. "I can't imagine that (Finance Minister) Jim Flaherty, for all his eloquence, is going to take the market's attention away from Cyprus at the moment," he added. The currency ended the session 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. CYPRUS WEIGHS Worries about how Cyprus's banking crisis may affect other indebted euro zone countries 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 zone currency bloc. "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, though he said that the link between risk appetite and the Canadian dollar has eroded somewhat. 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," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada, citing the benefit from New Zealand's GDP. "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," he said. "Our own data really, even though it looks good on the surface, the guts to the report aren't that encouraging." 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 year. 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 1 Canadian cent to yield 0.985 percent, while the benchmark 10-year bond climbed 39 Canadian cents to yield 1.820 percent.