Cotton gains on dollar slide, economic recovery hopes
- The cotton contract for March was up 0.45 cent, or 0.6%, at 72.60 cents per lb.
- We're seeing a huge break in the US dollar. A weak dollar is positive for cotton down the road.
ICE cotton futures rose on Tuesday as the dollar fell to multi-year lows, with prices of the natural fiber also latching onto upbeat sentiment in wider markets driven by hopes for a quick economic recovery.
The cotton contract for March was up 0.45 cent, or 0.6%, at 72.60 cents per lb by 12:11 p.m. EST (1711 GMT).
"We're seeing a huge break in the US dollar. A weak dollar is positive for cotton down the road," said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia.
"Hopefully, the vaccine is distributed around the world (and) we'll see demand pick up. As COVID-19 recedes and if governments print more money for stimulus, we will see a bigger break in the dollar and higher run of cotton and agriculture commodities."
The dollar index fell 0.6% to a 2-1/2-year low against its rivals, hurt by expectations for further US economic stimulus amid mounting coronavirus cases.
A weaker greenback makes cotton less expensive for buyers of the natural fiber in other currencies.
Meanwhile, sentiment in the wider financial markets remained upbeat as hopes over a potential COVID-19 vaccine and better-than-expected factory data from China boosted optimism for an economic rebound.
A weekly crop progress report from the US Department of Agriculture on Monday showed 84% of US cotton was harvested, versus 77% last week.
On the technical front, cotton prices may face resistance near the 74-75 cent level in the near-to-medium-term, Louis Rose, director of research and analytics at Tennessee-based Rose Commodity Group said in a note.
Total futures market volume fell by 7,933 to 12,685 lots.
Certificated cotton stocks deliverable as of Nov. 30 totaled 117,293 480-lb bales, up from 116,316 in the previous session.
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