NEW YORK: Cotton futures fell for the second straight session on Wednesday to a one-week low as the dollar firmed, while a subdued sentiment in wider financial markets also weighed on the natural fibre as focus turned to a federal export sales report.
The cotton contract for March fell 0.76 cent, or 0.9%, to 80.95 cents per lb by 1:40 p.m. EST (1840 GMT), having earlier touched its lowest since Jan. 20.
“We have a stronger dollar today and a weaker stock market” which is weighing on the cotton prices, said Peter Egli, director of risk management at British merchant Plexus Cotton.
Global equities fell and the dollar rose as investors turned more cautious of stretched stock valuations and the economic impact of the COVID-19 pandemic, with the Federal Reserve meeting later in the session.
The dollar was up 0.4% against key rivals, having touched a more than one-week high, making greenback-denominated natural fibre costlier for investors holding other currencies.
Market participants were also focused on the $1.9 trillion coronavirus relief proposal by the Biden Administration, which was facing strong opposition from Republicans over the size of the package.
“The $1.9 trillion (stimulus package) probably would not pass as intended and there is likely going to be a smaller package, but a lot of that money will be distributed to lower income families so they’ll have more buying power and that should be supportive for cotton,” Egli said.
Investors now await the United States Department of Agriculture’s (USDA) weekly export sales report, due on Thursday.
Total futures market volume fell by 14,820 to 25,729.
Certificated cotton stocks deliverable as of Jan. 26 totalled 77,059 480-lb bales, up from 73,984 in the previous session.