Feb 15 (Reuters) -U.S. cotton hit a near 17-month peak on Thursday, a rally sparked by technical buying and lower stocks, while a federal report showing firm exports added to the upbeat sentiment.

* Cotton contracts for May CTc2 rose 0.47 cents, or 0.5%, to 94.85 cents per lb by 11:37 a.m. ET (1637 GMT) after hitting its highest level since late September 2022 earlier in the session.

* Big technical buying from the funds, low U.S. carry out and weaker is helping prices, cotton could trade over $1 at some point, said Keith Brown, principal at cotton broker Keith Brown and Co in Georgia.

* "The weekly report showed that sales were weak but the shipments were a little stronger and China continues to be a major buyer."

* The U.S. Department of Agriculture (USDA) in it weekly export sales report showed exports of 276,100 running bales were up 11% from the previous week and 6% from the prior 4-week average. The destinations were primarily to China, Vietnam and Pakistan.

* But the report also noted net sales of upland cotton totalling 160,500 running bales for 2023/2024 were down 44% from the previous week and 49% from the prior 4-week average. EXP/COT

* The dollar index .DXY slipped 0.3%, making the natural fibre more attractive to overseas buyers. USD/

* India's cotton exports in February are set to jump to the highest level in two years, as a rally in global prices has made Indian cotton attractive for Asian buyers who earlier sourced the fibre from Brazil and the United States, traders said.

* Oil prices rose for the day on weaker dollar. Higher oil prices make polyester, a cotton substitute, more expensive/ O/R

Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri