Aug 18 (Reuters) -ICE cotton futures were headed for their worst week in more than five months on Friday, as economic concerns surrounding top buyer China clouded the demand outlook for the natural fiber.

* The most-active December cotton contract CTZ3 rose 0.03 cent, or 0.04%, to 83.64 cents per lb at 12:38 p.m. EDT (1638 GMT). But it is down 4.6% so far this week, on track for its worst fall since the week of March 10.

* The small uptick on the day was attributed to some short-covering, higher oil prices and a dip in the dollar, which makes cotton less expensive for overseas buyers. O/R USD/

* "The overarching negative is China herself despite the fact that she was the biggest buyer yesterday (export sales)," said Keith Brown, principal at cotton broker Keith Brown and Co, in Georgia

* "It's all a tug of war between a wounded crop and a wounded China", with the market at present ignoring the potential hit to the crop for hot and dry conditions in key growing regions, Brown added.

* China lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little and too late.

* In wider grain markets, Chicago wheat rose by nearly 2% as soybeans hovered around a two-week high while corn edged higher. GRA/

Reporting by Rahul Paswan in Bengaluru; Editing by Shilpi Majumdar