FOREX-US dollar drops to 2009 low on ratings worries

* Dollar under pressure on ratings concerns, risk-taking

* Dollar index drops to 2009 low, euro breaks $1.40

* Focus on U.S. Treasury auctions next week

(Adds details, updates prices)

By Wanfeng Zhou and Vivianne Rodrigues

The U.S. dollar dropped to its lowest level this year on Friday, and was on track for its biggest weekly fall in two months, on growing concerns about the AAA-rating status of the United States.

Investors worried about the U.S. sovereign credit rating after Standard & Poor's said it might cut Britain's AAA rating on Thursday, triggering heavy selling of in U.S. Treasury bonds and the dollar, although U.S. stocks edged up on Friday.

The ratings outlook downgrade of Britain focused attention on soaring fiscal deficits and debt in the United States fueled in part by the unprecedented efforts by the U.S. Treasury and the Federal Reserve to bolster the financial system.

"The fact that the market has seized on these concerns suggests that the impact of the recent monetary and fiscal easing is starting to grow, and certainly that points to a lower dollar moving forward," said Todd Elmer, currency strategist at Citigroup in New York.

A rise in U.S. stocks and more upbeat views of the recession-hit global economy also encouraged risk-taking by investors, helping the euro break above $1.40, while sterling hit a 6 1/2-month peak versus the dollar.

The dollar has come under heavy pressure in recent weeks as growing optimism that the worst of the global economic slump may be past dented safe-haven flows into dollar-denominated assets.

"So far, the market (has been) very much focused on the global recession and ... how quick and strong will the recovery be," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

The S&P news "has opened for the dollar a very worrying Pandora's box," he said.

The dollar index .DXY was on track for a 3.6 percent drop this week, the worst week since March. The index has lost more than 5.0 percent so far in May, one of its steepest monthly declines over the last 25 years.

In afternoon trading in New York, the ICE Futures U.S. dollar index .DXY, a gauge of its value against six major currencies, was down 0.6 percent on the day after hitting 79.805, a fresh 2009 low.

The euro was up 0.8 percent at $1.4009 , after hitting a session peak of $1.4050, according to Reuters data, the highest since early January.