US STOCKS-Wall St resumes decline as dollar hits 12-year high

* S&P poised for third straight weekly decline

* Crude oil weaker again, pressuring energy shares

* Indexes down: Dow 1.3 pct, S&P 1.1 pct, Nasdaq 0.9 pct (Updates to late afternoon)

By Caroline Valetkevitch

NEW YORK, March 13 (Reuters) - U.S. stocks dropped on Friday afternoon and the S&P 500 was on track for its third straight weekly decline as the dollar resumed its climb and lower oil prices hit energy shares.

The rise in the U.S. dollar index, which was set for its fourth straight weekly gain, added to worries about the currency's impact on U.S. multinationals' earnings.

The dollar hit a fresh 12-year high against the euro on Friday as dollar-buying momentum overcame soft U.S. economic data that would normally weaken it.

The S&P energy index fell 1.1 percent, among the biggest decliners of the 10 primary S&P 500 sectors.

Crude oil fell 4.7 percent to settle at $44.84 a barrel after the International Energy Agency said a global glut continued to build and U.S. oil production showed no signs of slowing. The commodity has fallen in six of the past seven sessions and is down almost 60 percent from a June peak.

Investors are focused on next week's Federal Reserve meeting, which could provide further insight into when the first rate increase will come.

Over the past 14 sessions, the S&P has had a correlation of -0.96 to the dollar index, meaning that stocks consistently fall on days when the dollar gains. Perfect inverse correlation is -1.0.

"The stronger dollar, the continued hammering of the euro, equals continued lower equity prices ahead of the Fed comments next week," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

"We'll know more of the Fed's thinking on Wednesday, but right now most people are expecting a rate hike to come in June and the equity markets not to be very receptive of that."

The Dow Jones industrial average fell 235.09 points, or 1.31 percent, to 17,660.13, the S&P 500 lost 22.22 points, or 1.08 percent, to 2,043.73 and the Nasdaq Composite dropped 41.99 points, or 0.86 percent, to 4,851.30.

The Dow was on track for a weekly drop of 1 percent while the Nasdaq on track for a drop of 1.6 percent. The S&P was down 1.3 percent on the week and set for its third straight weekly decline.

While the trend has been mostly lower, the market has been volatile. This week The S&P posted both its biggest one-day gain since February and its biggest one-day loss since January.

FXCM Inc (NYSE: FXCM - news) jumped 19.1 percent to $2.56 in heavy trading a day after fourth-quarter earnings beat expectations. This was the currency broker's first quarterly report since the removal of the cap on the Swiss franc sparked massive losses that pushed it to take a rescue loan.

Declining issues outnumbered advancing ones on the NYSE by 2,337 to 676, for a 3.46-to-1 ratio; on the Nasdaq, 1,914 issues fell and 774 advanced, for a 2.47-to-1 ratio.

The S&P 500 was posting 22 new 52-week highs and 26 lows; the Nasdaq Composite was recording 100 new highs and 91 lows. (Editing by Bernadette Baum and Nick Zieminski)