By Ayo Johnson

HAMILTON, Bermuda, Sept 7 (Reuters) - Hurricane Leslie was downgraded to a tropical storm on Friday as it swirled over the Atlantic on a track toward Bermuda but is expected to regain hurricane strength before passing by the island on Sunday, the U.S. National Hurricane Center reported.

A wealthy British overseas territory and global reinsurance center, Bermuda is not expected to take a direct hit from Leslie, which could re-strengthen by Sunday to a Category 1 hurricane, the lowest on the Saffir-Simpson scale of intensity.

Leslie then is expected to intensify into a Category 2 hurricane with wind speeds of 100 mph (160 kph) on Monday.

Forecasts show the storm will veer slightly east of the tiny island of 20 square miles (52 square km) with 65,000 residents.

Residents in the rocky archipelago stocked up on food and water - as well as alcohol, for traditional hurricane parties. Most government offices and all of the island's schools and beaches were closed on Friday.

Some of the island's hotels have advised guests to consider leaving early before the worst of the storm is felt.

Tropical storm-force winds are expected by Sunday morning to batter the island located 640 miles (1,030 km) off the east coast of the United States, as the season's sixth Atlantic hurricane follows its slow trajectory northward.

The Miami-based National Hurricane Center said Leslie was almost stationary, sitting about 410 miles (660 km) south-southeast of Bermuda with maximum sustained winds of 70 miles per hour (110 kph). Before being downgraded to tropical storm status, Leslie had spent two days as a Category 1 hurricane over the Atlantic.

The large span of storm winds combined with its slow movement "will produce large waves and life-threatening rip currents on Bermuda and along much of the U.S. East Coast through the weekend," the hurricane center said.

Southeasterly swells have been generating hazardous surf and rip currents in Bermuda's waters since Wednesday.

Farther out in the ocean, Hurricane Michael, the first Category 3 storm of the Atlantic hurricane season, was downgraded to Category 2 late on Thursday.

Michael was moving north on Friday, about 930 miles (1,495 km) west-southwest of the Azores, and was not a threat to land.

It had maximum sustained winds of 105 mph (165 kph). A gradual weakening is expected during the next 48 hours, the hurricane center said. (Editing by David Adams and Will Dunham)

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  • This NOAA satellite image taken Wednesday, September 5, 2012 at 10:45 AM EDT shows Hurricane Leslie south of Bermuda. In the Caribbean Sea, the monsoon trough is producing showers and thunderstorms over Colombia, Venezuela and the southwestern Caribbean Sea. Farther north, an area of low pressure off the coast of Alabama and western Florida Panhandle is producing showers and thunderstorms. This system has a low chance of development into a tropical cyclone. (AP PHOTO/WEATHER UNDERGROUND)

  • This NOAA satellite image taken Monday, September 03, 2012 at 01:45 PM EDT shows Tropical Storm Leslie located about 510 miles north of the Leeward Islands. (AP PHOTO/WEATHER UNDERGROUND)

  • This NOAA satellite image taken Monday, September 03, 2012 at 01:45 PM EDT shows Tropical Storm Leslie located about 510 miles north of the Leeward Islands. (AP PHOTO/WEATHER UNDERGROUND)

  • Senior Hurricane Specialist Lixion Avila checks the paths of tropical weather systems at the National Hurricane Center in Miami, on Thursday, Sept. 6, 2012. (AP Photo/J Pat Carter)

  • This NOAA satellite image taken on Thursday, September 06, 2012 at 10:45 AM EDT shows an area of low pressure over southeastern Canada, with a cold front extending southward through the eastern United States. (AP PHOTO/WEATHER UNDERGROUND)