Feb 5 (Reuters) -ICE cotton futures prices edged lower on Monday, after hitting their highest in more than four months as a higher dollar and downbeat sentiment across markets kept a lid over further gains.

* Cotton contracts for March CTc1 fell 0.21 cents to 86.9 cents per lb by 11:50 a.m. ET (1650 GMT) after hitting their highest since Oct. 2.

* "We're just getting ready for the supply and demand report later this week and we could see a little bit of profit taking because the market's been on a little bit of a run so the market could work a little harder," said Jack Scoville, vice president at Chicago-based Price Futures Group.

* The dollar is stronger again... so that's probably not helping cotton prices, added Scoville.

* The natural fibre was pressured by a higher dollar which rose to its highest in almost three months against other major currencies. This makes U.S. cotton more expensive for overseas buyers. USD/

* Wall Street's main indexes fell as Treasury yields rose after Fed Chair Jerome Powell pushed backfirmly against market speculations of imminent rate cuts. .N

* In the wider grains market, Chicago wheat, corn and soybeans fell with soy hitting 24-month lows, as dollar strength and lacklustre global import demand weakened sentiment. GRA/

* "I have to be just impressed with the way cotton is able to stay aloft versus so many outside markets that are down. It's just a technical move," said Keith Brown, principal at cotton broker Keith Brown and Co, in Georgia.

* Speculators raised net long position by 2,460 contracts to 24,435 contracts in the week of Jan. 30.

Reporting by Rahul Paswan in Bengaluru; Editing by Krishna Chandra Eluri