ICE cotton futures fell more than 2pc on Thursday as the dollar jumped to a multi-month peak, with the natural fiber also tracking weakness in grains and broader markets.

Cotton contracts for December fell 1.77 cent, or 2.1pc, at 84.18 cents per lb, by 12:21 p.m. EDT (1621 GMT).

"The market has been showing a little bit of weakness this week. Some of this seems to be coming from the outside market forces, in particular, the dollar index is trading quite a bit higher and grains are down as well," said Bailey Thomen, cotton risk management associate at StoneX Group.

The dollar rose to a two-month peak, a day after the U.S. Federal Reserve signaled it would raise interest rates in 2023.

"The fact that the U.S. Federal Reserve acknowledged some of the increase in the risk of inflation and their need to raise interest rates sooner than expected has added a little bit of fear to the markets," Thomen added.

Chicago corn futures slid more than 2pc and soybeans dropped to a six-week low, while global equity markets headed for their biggest fall in weeks.

Cotton declined, despite decent export sales figures from the U.S. Department of Agriculture (USDA).

Net sales of 111,300 running bales (RB) for 2020/2021 were up 3pc from the previous week, while exports of 303,800 RB were up 18pc.

Focus remains on the June 30th acreage report for clarity on the U.S. production estimates.

The dollar strength and uncertainty ahead of the acreage report are weighing on cotton, Commerzbank said in a note.

"Despite a 16pc rise in production in the U.S., another good crop in India and increases in Brazil and Australia, the USDA expects the market to be in deficit in 2021/22," as demand remains robust.