Aug 23 (Reuters) -ICE cotton futures rose more than 2% on Friday, hitting their highest level in a month, and were on track for their best week in three months on lower U.S. dollar and upbeat sentiment in wider financial and commodity markets.

* Cotton contracts for December CTZ4 rose 1.74 cent, or 2.51%, to 71.08 cents per lb at 11:40 a.m. EDT (1540 GMT), having hit theirhighest level since July 22 earlier in the session.

* The contract was up 5.8% so far this week.

* "Crude oil is trading quite a bit higher, stocks and everything are also up as well... dollar is also down today, so I think all these factors are playing in today," said Bailey Thomen, cotton risk management consultant at StoneX Group.

* "Besides that could be a little bit of repositioning ahead of the weekend," added Thomen.

* The dollar index .DXY dropped to its lowest level in nearly eight months, down 0.8% against its rivals, making cotton less expensive for overseas buyers.

* Oil prices rose more than 1%, making cotton-substitute polyester more expensive. O/R

* World shares gained on Friday, just shy of all-time highs, after a speech by Federal Reserve Chair Jerome Powell confirmed the U.S. central bank would soon begin interest-rate cuts. MKTS/GLOB

* Elsewhere, Chicago wheat fell for a third session, while corn and soybeans steadied near four-year lows, with the easing of a rail stoppage in Canada shifting attention to ample global supplies. GRA/

Reporting by Anmol Choubey in Bengaluru; Editing by Shreya Biswas