* Traders shrug off USDA report maintaining U.S. stocks forecast

* Second month prices climb toward overbought RSI

* Trading volumes heavy amid spreading activity

NEW YORK, Feb 11 (Reuters) - ICE cotton rallied on Tuesday to the highest prices since August, as traders expected U.S. supplies to remain tight and discounted Monday's U.S. government report that kept its inventories forecast for the world's top exporter unchanged.

The most-active May cotton contract on ICE Futures U.S. closed up 1.3 cents, or 1.5 percent, at 89.20 cents a lb. It rallied as high as 89.34 cents, the highest for the second month since mid-August.

Trading volumes were heavy as dealers rolled positions out of the March into May.

The spot March contract on ICE finished the day up 1.3 cents, or 1.5 percent, at 88.67 cents a lb. The front month matched but did not surpass the previous day's six-month high of 88.84 cents.

Global equities also rallied, after remarks from Federal Reserve Chair Janet Yellen inspired optimism that the U.S. economy is poised for more growth.

Cotton was the second-biggest gainer in the bellwether Thomson Reuters/Core Commodity CRB index, after natural gas futures.

Traders resumed buying a day after the U.S. Agriculture Department surprised the market by keeping its outlook for U.S. cotton supplies unchanged in a monthly forecast.

The day's gains left the second month on brink of overbought territory, with a 14-day relative strength index of 67.8.

"People don't believe the number because of exports and because they see how tight the cash market is," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia.

The recent pace of exports has been strong, with U.S. output at a four-year low, keeping supplies in the United States tight and raising expectations the USDA will lower its outlook for inventories in the world's top exporter by the end of the 2013/14 crop year on July 31.

Even so, world inventories are expected to reach a record by the end of 2013/14 as global production again outstrips demand and supplies in top consumer China balloon due to a government stockpiling program.

ICE stocks continued to climb. They reached 235,800 bales on Monday, up from 227,300 bales previously and at the highest level since late November, according to exchange data compiled by Reuters. (Reporting by Chris Prentice; Editing by David Gregorio)