Jan 24 (Reuters) - Cotton prices rose to a two-week high on Friday, supported by a lower dollar and a robust federal export sales report that showed improved demand for the natural fiber.

* Cotton contracts for March CTc1 rose 0.21 cent, or 0.31%, to 67.68 cents per lb at 10:45 a.m. ET (1545 GMT), hitting its highest level since Jan. 10, earlier in the session.

* "We had another strong export sales report today, which is showing that U.S. cotton is being sold more quickly now and shipments are moving along. So that's a good signal for prices to continue to move a little bit higher," said Bailey Thomen, cotton risk management consultant at StoneX Group.

* The United States Department of Agriculture's weekly export sales report showed net sales of upland cotton totaling 348,900 running bales (RB) for 2024/2025, marketing year high, up 10% from the previous week and 62% from the prior four-week average. EXP/COT

* The report further showed the export sales of upland cotton at 222,600 RB, down 1% from the previous week but up 32% from the prior four-week average.

* "The dollar is falling significantly. So I would say that certainly is the other factor that's contributing a little bit here to the strength in cotton," Thomen said.

* The dollar index fell and was on track to log its worst week in more than a year, after U.S. President Donald Trump suggested a potentially softer stance on tariffs against China which added to uncertainties around U.S. trade policies. USD/

* A weaker dollar makes cotton less expensive for overseas buyers.

(Reporting by Noel John and Anmol Choubey in Bengaluru; Editing by Shailesh Kuber)

((anmol.choubey@thomsonreuters.com;))