July 15 (Reuters) -ICE cotton futures rose more than 2% on Monday hitting its highest level in near two weeks, as traders amplified their net short positions following last week's low cotton trade, while an upbeat sentiment in equities also helped.

* Cotton contracts for December CTZ4 rose 1.68 cent, or 2.36%, to 72.95 cents per lb at 11:25 a.m. EDT (1525 GMT), its highest level since July 3.

* "The managed money funds actually increased their net short position... so that sort of generates some buying because it means the market is saturated short to the downside," said Keith Brown, principal at cotton broker Keith Brown and Co, in Georgia.

* Cotton speculators increased their net short position by 6,378 contracts to 45,122 in the week to July 9.

* "The other thing is that the market, held the 70 cent... so the fact we could not break that low is also encouraging some short covering," Brown said adding that, cotton prices might be slightly undervalued at the moment and could potentially rise towards 75 cents.

* Supporting the natural fiber, Dow hit a record high in Wall Street's upbeat trading on Monday, while the U.S. dollar index .DXY fell 0.2% against its rivals and was hovering around more than a month low, making cotton less expensive for overseas buyers. .N USD/

* Elsewhere, Chicago wheat prices touched their lowest in about four months on Monday as pressure from freshly harvested crops in the United States and Russia weighed on prices. GRA/

Reporting by Anmol Choubey in Bengaluru; Editing by Shailesh Kuber