GRAINS-Soy extends rally on strong demand, weak dollar

* U.S. soy to 12-week top, strong U.S. exports continue

* Weak dollar spurs commodities rally, supports grains

* Wheat, corn advance although supplies still bearish

(Updates with U.S. trading, changes byline, dateline; previous SINGAPORE/PARIS)

CHICAGO, Nov 23 - U.S. soybean futures advanced for a third straight day on Monday, rising to a 12-week high on reminders of strong demand and a broad-based commodities rally powered by a weakening dollar.

Corn also rallied, snapping a four-day losing streak on spillover strength from soybeans and the sagging dollar.

Wheat was the biggest gainer on a percentage basis, despite being saddled with the most bearish fundamentals, including a burdensome global wheat glut.

Wheat's ability to overcome its supply issues underscored the role of the dollar in attracting funds and other large speculators into grains.

"The fund money has been really impressive for the last month or so," said Brian Basting, an analyst with Advance Trading in Bloomington, Illinois.

"Not only with gold making a new high every day, but (funds are) coming back in here to beans, corn and wheat -- the fundamentals for wheat are not terribly bullish, and yet, here we go," he said.

The dollar is expected to remain a major influence on grain markets this week. The currency fell after comments from a U.S. Federal Reserve official supported expectations U.S. interest rates would stay low for some time.

However, soybeans have emerged as an independent driver of grains, even as the dollar strengthened at the end of last week. Chicago Board of Trade January soybeans reached $10.66-3/4 a bushel, the highest spot price since Sept. 1, before giving back some gains.

"Soybeans are continuing the momentum that they developed last week," said Toby Hassall, an analyst with CWA Global Markets in Sydney.

Soybeans got another bullish signal Monday when the U.S. Department of Agriculture reported export inspections of U.S. soybeans in the latest week at 73.8 million bushels, above trade estimates for 54 million to 58 million.

The vast majority was earmarked for China.

"I've never seen anything close to that before," Advance Trading's Basting said of the inspections figure, adding, "Regardless, I think it's been built into the market."

In fact, soybeans and corn backed off their highs by midsession, due in part to hedge-related selling by farmers seeking to lock in prices near the highs.

Concerns about wet weather in Brazil delaying plantings and rains in the U.S. Midwest that may slow the late harvest underpinned the grain markets, although the weather is expected to turn dry around the weekend.

U.S. farmers have nearly wrapped up the soybean harvest, which was 89 percent complete by Nov. 15. They have turned their attention to corn, which was only 54 percent harvested -- far behind the five-year average of 89 percent.

USDA was scheduled to issue an updated report on harvest progress later on Monday.

WHEAT SUPPLIES STAY HEAVY

CBOT January soybeans were up 4 cents, 0.38 percent, at $10.50 a bushel by 1736 GMT, corn for December delivery was up 4 cents, 1.02 percent, at $3.95 a bushel while CBOT December wheat rose 8-1/2 cents, 1.52 percent to $5.68-1/4.

Milling wheat futures in Europe tracked the upward trend in Chicago prices, with the benchmark January contract in Paris up 1.13 percent at 134.50 euros a tonne.

However, analysts said corn and wheat markets are burdened by ample supplies and weaker demand than for soybeans.

"From the fundamental point of view, wheat looks prone to downside this week. Corn could also fall," Hassall said.

A global wheat supply glut was highlighted by Australia, which had 3.7 million tonnes of wheat in bulk storage at end-October as farmers began harvesting the 2009/10 crop, around double the stock levels of a year ago. Prices at 11:53 a.m. CST (1753 GMT)

Pct 2008 YTD

Last Change Chg Close Pct Chg --------------------------------------------------------------- CBOT corn Cc1> 3.9450 0.0350 0.9 4.07 -3.1 CBOT soy Sc1> 10.4825 0.0225 0.2 9.7225 7.8 CBOT meal SMc1> 317.10 0.00 0.0 300.5 5.5 CBOT soyoil BOc1> 0.4002 0.0031 0.8 0.3329 20.2 CBOT wheat Wc1> 5.6775 0.0800 1.4 6.1075 -7.0 CBOT rice RRc1> 15.2350 0.0650 0.4 15.34 -0.7 EU wheat BL2F0> 134.50 1.5 1.1 137 -1.8 US crude CLc1> 78.07 0.6 0.8 44.60 75.0 Dow Jones .DJI> 10438 120 1.2 8776 18.9 Gold XAU=> 1166.75 18.55 1.6 878.20 32.9 Euro/dollar EUR=> 1.4978 0.0119 0.8 1.3978 7.2 Dollar Index .DXY> 75.0810 -0.5750 -0.8 81.1510 -7.5 Baltic Freight .BADI> 4423 -84 -1.9 774 471 *Front month contracts. CBOT contracts in cents per bushels except rice which is in dollars per hundredweight. Paris wheat in euros a tonne and London wheat in pounds per tonne (Additional reporting by Naveen Thukral in Singapore and Gus Trompiz in Paris; Editing by Marguerita Choy) ((julie.ingwersen@thomsonreuters.com; +1 312-408-8720; Reuters Messaging: julie.ingwersen.reuters.com@reuters.net)) (