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GRAINS-Wheat rises on short-covering, Ukraine worries; corn, soy firm

(Recasts; updates prices; adds quotes; changes byline; dateline previously SINGAPORE/PARIS)

By Julie Ingwersen

CHICAGO, Sept 27 (Reuters) - U.S. wheat futures rose about 2% on Tuesday as worries about escalating conflict in Ukraine and a pause in the dollar's run-up to 20-year highs spurred a round of short-covering, traders said.

Corn and soybean futures also firmed but pared gains as an early rally in Wall Street equity markets faltered.

As of 12:58 p.m. CDT (1758 GMT), Chicago Board of Trade December wheat was up 17-1/2 cents at $8.75-1/2 per bushel. CBOT December corn was up 3-1/4 cents at $6.69-1/2 a bushel and November soybeans were up 2-1/4 cents at $14.13-1/2 a bushel.

Wheat posted the biggest advances on a percentage basis, even as the dollar index hovered near a 20-year high set this week. A strong dollar tends to make U.S. grains less attractive to those holding other currencies.

"Funds have a big short position in Chicago (wheat) and I think they are buying some of that back. The overall strength of grains is impressive, given how much the dollar has moved up," said Sterling Smith, director of agricultural research at AgriSompo North America.

Traders were monitoring conflict in Ukraine, which has disrupted grain exports from the Black Sea, after an ally of President Vladimir Putin issued a stark new nuclear warning to Ukraine and the West.

"The 'nuclear premium' in the market didn't last long, but the overall positive money flow into the grain and oilseeds continues into midday," StoneX chief commodities economist Arlan Suderman wrote in a client note.

Corn and soybean futures drew support from a slow start to the U.S. harvest, although weather forecasts called for favorably dry conditions in much of the Midwest this week that should help advance fieldwork.

The U.S. Department of Agriculture late Monday said the corn harvest was 12% complete, behind the five-year average of 14%. The soybean harvest was 8% complete, lagging the five-year average of 13%.

But trends in outside markets remained a key driver for grain futures, given fears of a global recession that could curb demand for goods.

"We are a little starved for news, (and) harvest is just getting under way. So the macro markets are driving the bus," Smith said.

Traders await the USDA's quarterly U.S. grain stocks report on Friday, which has a history of jolting futures markets. (Additional reporting by Naveen Thukral in Singapore and Sybille de La Hamaide in Paris; Editing by Mark Potter and Leslie Adler)

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