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* C$ at C$1.0326 vs US$, or 96.84 U.S. cents * Equity and currency markets volatile on Fed stimulus concerns * Bond prices generally higher across curve By Solarina Ho TORONTO, May 24 (Reuters) - The Canadian dollar retreated against the U.S. dollar on Friday, in sync with weaker global equity markets and other commodity currencies, as investors worried that the U.S. Federal Reserve could rein in its stimulus policy. Equity markets have hit their highest levels in years in recent weeks, bolstered by stimulus measures taken by the Fed and other central banks. Worries that the Fed may begin tapering its $85 billion a month bond purchases sent a gauge of global equity markets to its second biggest daily loss of the year on Thursday. "We're still seeing heightened volatility in currency markets. A lot of that is obviously relating to some of the equity market activity," said Blake Jespersen, managing director, foreign exchange sales, adding that the Canadian dollar was in a consolidation mode. "It seems to be comfortable trading around the C$1.0350 area and it doesn't look like we'll see a lot more weakness over the coming day or so. I think we've flushed out some of the overly long U.S. dollar positions in the last day or so." At 9:55 a.m. (1355 GMT), the Canadian dollar was trading at C$1.0326 against the U.S. dollar, or 96.84 U.S. cents, after ending Thursday's North American session C$1.0294, or 97.14 U.S. cents. The currency, which is trading around its weakest level in about 11 months, has shed some 3.2 percent since May 8, when it closed at C$1.0030, its strongest finish since mid-February. It was weaker against most other major currencies, except for its commodities peers, the Australian and New Zealand dollars, which were the weakest performers. Jespersen expected the Canadian dollar to trade between C$1.0320 and C$1.0350 on Friday. Investors are unlikely to build fresh positions ahead of a long weekend in the United States and in Britain and Jespersen said the market may see a little bit of profit taking on the long U.S. dollar positions that have built up significantly in recent weeks. "The U.S. rally is somewhat intact, it's just taking a little bit of a breather as we end the week here," he said. Prices for Canadian government debt were mostly higher, with the two-year bond adding half a Canadian cent to yield 1.034 percent and the benchmark 10-year bond up 9 Canadian cents to yield 1.951 percent.