Sept 16 (Reuters) -ICE cotton futures rose more than 3% to a two-month high on Monday, supported by a sliding U.S. dollar and higher oil prices amid hopes for an interest-rate cut by the Federal Reserve later this week.

* Cotton contracts for December CTZ4 rose 2.58 cents, or 3.7%, to 72.41 cents per lb at 10:07 a.m. EDT (1407 GMT), after hitting their highest since July 16.

* "There is the notion that the Fed is going to cut interest rates, therefore the dollar down. Also, there is a storm off the coast of the Carolinas and that could certainly mess up the mid-Atlantic crop," said Keith Brown, principal at cotton broker Keith Brown and Co in Georgia.

* "However, the Chinese economy is slow and demand will have to shift somewhere else. Cotton demand can be off around the world. Right now these supply cuts from mother nature is offering support."

* The dollar =USD fell 0.4% to a near three-week low against its rivals, making cotton less expensive for other currency holders.

* Oil prices rose about 2% on Monday as continuing disruption to U.S. Gulf oil infrastructure balanced persistent demand concerns after a fresh round of Chinese data. O/R

* Higher oil prices make cotton-substitute polyester more expensive.

* Market participants look forward to the U.S. central bank's policy meeting decision on Wednesday. Market pricing on the upcoming Fed decision now shows that a 50-bps cut (59% chance) is more likely than 25bps.

* Elsewhere, Chicago wheat futures dipped from three-month highs on Monday, although the market was underpinned by crop concerns in Europe and escalating tensions between Russia and Ukraine. GRA/TEND

* Meanwhile, Cotton speculators increased their net short position by 6,609 contracts to 62,979 in the week of September 10.

Reporting by Brijesh Patel and Anushree Mukherjee in Bengaluru; Editing by Shreya Biswas