CANADA FX DEBT-C$ hits fresh 7-mth high, bonds slip

* C$ pushes to 88.88 U.S. cents, strongest since Oct. 9

* Bonds slightly lower on supply concern

TORONTO, May 22 (Reuters) - The Canadian dollar hit a fresh seven-month high versus the U.S. dollar on Friday, spurred by market worries about the triple-A credit ratings of the United States.

The Canadian currency pushed as high as C$1.1251 to the U.S. dollar, or 88.88 U.S. cents, its strongest level since Oct. 9.

Standard & Poor’s revised its UK ratings outlook lower this week, fueling jitters that Washington’s growing deficit could lead to a credit rating downgrade for the United States. [ID:nLL180301]

But Moody’s Investors Service said it is comfortable with its triple-A sovereign rating on the United States, although the rating was not guaranteed forever. [ID:nN21313143]

Still, the U.S. dollar was on the decline against a broad range of currencies, and the dollar index hit its lowest in five months against a basket of currencies. [FRX/]

“It’s a cocktail of a whole load of different factors that are all pushing in one direction,” said Adam Cole, global head of FX Strategy at RBC Capital Markets in London.

He said among the factors helping the Canadian dollar were pressure on the U.S. dollar, equity markets that were heading higher, and strengthening commodity markets.

“All of that together really has pushed us down to new lows in dollar/Canada.”

At 7:55 a.m. (1155 GMT), the Canadian unit CAD=D3 was at C$1.1262 to the U.S. dollar, or 88.79 U.S. cents, up sharply from C$1.1380 to the U.S. dollar, or 87.87 U.S. cents, at Thursday's close.

Currency markets may be in for a volatile session as traders gear up for holiday closures on Monday in the U.S. and British financial markets.

“We’ve had some big moves this week and there could well be all sorts of profit-taking flow and position lightening flow ahead of the long weekend. Things could be very choppy for the remainder of the day,” said Cole.

Meanwhile, Canadian bonds were slightly lower across the curve as upcoming supply concerns weighed and despite a positive tone to equity markets.

The benchmark two-year government bond dipped 2 Canadian cents to C$100.18 to yield 1.159 percent, while the 10-year bond fell 8 Canadian cents to C$104.00 to yield 3.279 percent.

The 30-year bond lost 5 Canadian cents to C$117.05 to yield 3.985 percent. The U.S. 30-year yield was 4.285 percent. (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)