GRAINS-Soybean rally stalls as wheat sets seven-week high

* More dry weather expected in rival exporter Argentina

* Soy supplies seen ample despite Argentine crop concerns

* Short-covering propels wheat higher, traders say (Adds U.S. trading, changes byline/dateline from LONDON)

CHICAGO, Jan 26 (Reuters) - U.S. soybean futures slumped on Friday, pulling back from recent gains, while wheat futures set a seven-week high on short-covering and technical buying.

Despite the decline in soybeans, that market remained on track for a weekly gain, with dry weather in rival shipper Argentina underpinning prices. Weakness in the U.S. dollar, which makes U.S. farm products more attractive to global buyers, also supported agricultural commodities, traders said.

Argentina, the world's No. 3 exporter of soybeans and corn and the No. 1 supplier of soymeal livestock feed, could suffer from reduced harvests due to persistently hot, dry weather, they said.

Worries that Argentina's drought could reduce global inventories helped lift soybean futures above $10 a bushel for the first time in seven weeks on Thursday before the market ended flat. Still, such concerns could continue to support prices, analysts said.

More dry weather is expected next week and most of the following week across the major growing areas in Argentina, according to U.S.-based weather forecaster Radiant Solutions.

"Notable declines in soil moisture are still expected across Argentina over the next two weeks, leading to some crop stress," Radiant Solutions said.

The most actively traded soybean contract was down 4-3/4 cents at $9.87-1/2 a bushel by 11:25 a.m. CST (1725 GMT) at the Chicago Board of Trade.

CBOT wheat was up 4 cents at $4.38-1/2 a bushel after touching $4.40-3/4, the highest price for a most-active contract since Dec. 4.

Corn futures were flat at $3.55-1/4 a bushel.

"The weather in Argentina still remains a wild card," said Kevin Van Trump, president of U.S. consultancy Farm Direction.

Big harvests in Brazil and the United States, the world's top two soybean exporters, may offset crop losses in Argentina. Global supplies are also ample, with the U.S. Department of Agriculture projecting world soybean inventories at the end of the 2017/18 marketing year at an all-time high.

U.S. soybean export sales of 759,300 tonnes for the week ended on Jan. 18 were below analysts' estimates of 850,000 to 1.2 million. Corn export sales of 1.5 million tonnes were above expectations of 900,000 to 1.25 million.

Separately, private exporters struck deals to sell 125,000 tonnes of U.S. corn to unknown destinations, the U.S. Department of Agriculture said on Friday. The agency announced a sale of the same volume of corn to unknown destinations on Wednesday. (Additional reporting by Nigel Hunt in London and Naveen Thukral in Singapore; Editing by Elaine Hardcastle and Lisa Von Ahn)