Sept 18 (Reuters) -ICE cotton futures extended losses on Wednesday, down nearly 2%, on growing concerns over demand and as caution sets in ahead of the U.S. Federal Reserve monetary policy decision later in the day.

* Cotton contracts for December CTZ4 slipped $1.35, or 1.9%, to 70.81 cents per lb at 12:04 p.m. EDT (1604 GMT).

* "Demand failed to follow the rally and selling by producers increased which is pressuring prices under key support levels," said Valentin Olah, risk management consultant at StoneX Group.

* "Prices are expected to be in a 69-73 cents range bound trading in the near-term," Olah added.

* Focus now shifts to the U.S. Department of Agriculture's (USDA) weekly exports sales data due on Thursday for more cues on demand for the natural fiber.

* Last week, the USDA report showed export sales of 113,100 running bales (RB), down 30% from the previous week and 33% from the prior 4-week average. EXP/COT

* Meanwhile, wider financial and commodity markets were trading water as investors stepped onto the sidelines ahead of the Federal Reserve's highly anticipated first interest rate cut in more than four years. .N

* Offering some respite, the U.S. dollar edged lower against major currencies, giving up some of its overnight gain. USD/

* Chicago wheat futures rose on Wednesday after France's farm ministry downgraded the country's crop again, though sizeable exports of cheap Black Sea wheat continued to stifle a rally that drove prices to three-month highs last week. GRA/

Reporting by Brijesh Patel in Bengaluru; Editing by Shailesh Kuber