* C$ sharply lower at 97.70 U.S. cents
* Bonds higher on euro zone contagion worries
TORONTO, Nov 26 (Reuters) - The Canadian dollar skidded more than a penny on Friday as the risk appetite of investors was hit hard with financial markets rattled by worries over peripheral euro zone debt.
Commodity prices, European stocks and the euro slid against the dollar on Friday, while Wall Street looked set to open lower following its Thanksgiving break the day before. [MKTS/GLOB]
European officials denied "absolutely false" reports Portugal was under pressure to seek a bailout and Spain ruled out needing help to manage its finances, despite fears of a spreading euro debt crisis. [ID:nLDE6AP08Y]
As well, China warned against military acts near its coastline ahead of U.S.-South Korean naval exercises that North Korea said risked pushing the region towards war. The North shelled a South Korean island earlier this week. [ID:nL3E6MQ058]
"(The U.S. dollar) vaulted higher in the European session with recent CAD gains on speculation of future rate hikes being swept away instantly by the negative impact of Korean (and) European events," John Curran, senior vice president at CanadianForex, said in a note to clients.
"Volatility will remain as holiday thinned market reactions to any further news will exaggerate moves."
The Canadian currency CAD=D4 touched a low of C$1.0247 to the U.S. dollar, or 97.59 U.S. cents. At 8:45 a.m. (1345 GMT), it stood at C$1.0235 to the U.S. dollar, or 97.70 U.S. cents, down sharply from Thursday's close at C$1.0097 to the U.S. dollar, or 99.04 U.S. cents.
Canadian bonds firmed across the curve, tracking U.S. Treasuries, as prices climbed on mounting speculation Portugal will follow Ireland in seeking bailout funding. [US/]
The two-year government of Canada bond CA2YT=RR rose 6 Canadian cents to yield 1.699 percent, while the 10-year bond CA10YT=RR was up 22 Canadian cents to yield 3.142 percent. (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)