April 24 (Reuters) -ICE cotton futures fell on Wednesday, hurt by downbeat sentiment in the grains, oil and financial markets, while a stronger dollar also pressured the natural fiber.

* Cotton contracts for July CTc2 fell 0.4 cent, or 0.5%, to 81.28 cents per lb by 12:27 p.m. ET (1627 GMT).

* "We were a lot higher a few weeks ago and the trading funds manage money were long, and then they liquidated some of that and it looks like they're getting back long again," Kansas-based commodity analyst Sid Love said.

* "China is supposed to import and so we'll see how that develops, but I think that the market has really been operating on inflation-deflation psychology," he added.

* Oil prices were moderately lower as worries over conflict in the Middle East eased and business activity in the world's largest oil consumer slowed. O/R

* Lower oil prices make cotton-substitute polyester less expensive.

* Chicago wheat fell, receding from two-month highs hit on Monday, as large exports of Russian wheat depressed sentiment.

* Wall Street's main indexes also pared early gains to trade lower, as losses in heavyweight tech stocks outweighed positive earnings across several sectors and rising Treasury yields further pressured equities.

* Meanwhile, the dollar index .DXY firmed 0.2% against its rivals, making cotton more expensive. USD/

* Traders now await Thursday's United States Agriculture Department's (USDA) weekly export sales report for more clarity on demand.

* Last week's report showed net sales of 146,100 running bales for 2023/2024, up 79% from the previous week and 64% from the prior four-week average. EXP/COT

Reporting by Anjana Anil in Bengaluru; Editing by Alan Barona