Liffe December cocoa futures closed sharply higher on Wednesday on fund buying and a firmer dollar, reversing losses earlier in the day, traders said.
Benchmark December finished up 43 pounds at 936 pounds, just two pounds shy of the day's 938 peak in volume of 6,490 lots. Its lowest point was 884.
"It's partly fund buying. The stronger dollar is helping," a trader said.
"Funds had been short of cocoa for a long time. Recently the funds have been aligning their positions with other soft commodities."
Cocoa briefly hit a session peak of 938 - its highest since the beginning of March.
Cocoa's rally to new highs is being driven by speculative funds, but fundamental worries about next season's crops are underpinning the market's sudden advance, analysts and traders said on Wednesday.
Sterling fell one percent against the dollar on Wednesday as the US currency extended its broad gains, driven by upbeat comments on the economy from Federal Reserve Chairman Alan Greenspan and by shifts in market positioning.
Cocoa prices have been in a broad downtrend since reaching a peak above 1,650 pounds in 2002 as Ivory Coast descended into civil war.
The success of Ivorian growers in maintaining production and the flow of cocoa to market in the face of that conflict has been the main source of pressure on prices throughout the past two years.
Traders said the latest buying spree had wiped out the funds' net short position, which they had been holding for several months. They were now thought to be slightly long.
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