GRAINS-U.S. soybeans, corn rise on short-covering

* Short-covering boosts prices

* Favourable weather outlook, firm dollar limits upside

* Speculative long corn positions face heavy losses (Adds details)

SYDNEY, June 23 - U.S. soybean and corn futures nudged higher on Tuesday on short-covering, but gains were curbed by favourable weather conditions and a firm dollar.

Wall's Street sell-off on Monday, its worst one-day loss in two months, drove up the safe-haven U.S. dollar, denting the upside for greenback-priced commodities such as grains which became more expensive for overseas buyers.

"Beans and corn have been pretty heavily sold over the last couple of sessions so we've seeing a bit of a short-covering session, though it won't last that long as weather conditions are quite favourable," said Doug Whitehead, a commodity strategist at Australia&New Zealand Banking Group Ltd.

Chicago Board of Trade soybeans for July delivery rose 0.65 percent to $11.59 per bushel by 0330 GMT while July corn gained 0.39 percent to $3.86-¾ per bushel. Wheat for July delivery fell 0.73 percent to $5.42 per bushel.

Wheat futures are languishing at six-week lows as harvesting of the new U.S. winter wheat crop accelerates amid improving weather conditions.

After a wet weekend across the U.S. southern Plains, the next week to 10 days should be mostly clear, giving wheat farmers a big window to run combines across Kansas, the top U.S. wheat state.

"The weather premium has been taken out of wheat," said Whitehead.

Corn prices have sunk to two-month lows as crops in the U.S. Midwest look set to be boosted for warm weather this week, which will follow heavy weekend rains and create a perfect climate to boost young corn and soybean seedlings.

"Corn has fallen so hard and so fast that you have got a lot of spec long positions caught on the wrong-side now so they've been shorting it pretty hard," said Whitehead.

Soybean futures recovered from a one-month trough struck on Monday, when an improved weather outlook for young crops countered tight supplies of old crop beans.

"Beans have probably over-extended to the downside as they still have some reasonably favourable fundamentals, particularly in the front-month contract as old crop stocks are still pretty tight," said Whitehead.

The price spread between old-crop July soybeans and new-crop November soy remains relatively wide, at around $1.70 with July at a premium, reflecting tight domestic supplies of old crop beans. PRICES AT 0330 GMT Contract Last Change Pct chg Day ago pct MA 30 RSI CBOT wheat 542.00 -4.00 -0.73% -2.39% 597.54 35 CBOT corn 386.75 1.50 +0.39% -3.13% 423.92 34 CBOT soy 1159.00 7.50 +0.65% -1.70% 1191.51 35 CBOT rice $12.11 -$0.04 -0.33% -1.54% $12.31 43 WTI crude $66.70 -$0.80 -1.19% -4.10% $65.82 51 Currencies Euro/dlr $1.385 -$0.001 -0.07% -0.72% USD/AUD 0.782 -0.003 -0.43% -2.87% (Reporting by Bruce Hextall; Editing by Ben Tan)