Benchmark arabica coffee futures surged on Friday just before the close as speculators saw the opportunity to buy ahead of the long holiday weekend in London and Brazil, both of which are closed on Monday to celebrate May Day, dealers said.
"In the last five minutes we went up very quickly. There was not a lot of volume, I think it was mostly in the hands of some small speculative guys, with a little bit of origin selling here and there," said one New York coffee trader.
The New York Board of Trade's active arabica contract for July delivery gained 1.70 cents to settle at $1.0970 a lb., after trading from $1.0815 to $1.0990 a lb.
The September contract rose 1.70 cents to end at $1.1245, and back months closed up 1.50 to 1.70 cents.
In addition to coffee purchases made if there are potential price gains while London and Brazil markets are closed, dealers said a weak dollar, especially against European currencies, supportive technical factors, and renewed gains in commodity markets overall all helped lift coffee prices on Friday.
"The market technically held above yesterday's low. The euro was stronger and the CRB was also strong showing commodities overall going higher. That indicates yesterday's selling was a correction and everything is back to normal today, so you get a bounce off that," a trader said.
On Thursday, coffee futures closed 3 percent lower in an across-the-board corrective selloff in commodity markets.
With fund investors pouring into commodity markets since the beginning of the year, some players fear that prices may be overbought and subject to sudden routs.
While Thursday's selling was one of those situations, traders said there are also many bulls still in the market waiting for such opportunities to buy those dips.
Coffee headed towards the low end of its wide 2-1/2 month range on Thursday, near technical support levels that have held twice before.
"There was some technical selling. You did see some origins showing up here and there to sell, but we got back to the bottom of the range we've seen for awhile. Every time you get back there you see bottom pickers come in," a trader said.
In London, Liffe robusta coffee futures closed higher as funds continued to build up long positions, dealers said, who added that switches accounted for a big part of total volume, which stood at 34,175 lots.
Benchmark July robusta ended up $26 at $1,217 a tonne, while May ended up $19 at $1,189. The Reuters/Jefferies CRB Index of 19 commodity futures gained 4.15 points or 1.20 percent to 349.84. Estimated coffee futures trading volume on the New York exchange came to 10,803 contracts, about half Thursday's official count of 20,668 lots.
Turnover in coffee put options hit 2,103 lots, while call options reached 4,894 contracts, NYBOT data showed. Technically, the July contract has been held in a wide range between $1.0625 and $1.1770 since the start of March. Thursday's decline hit a low at $1.0730, but all factors combined helped lift coffee before it fell to the prior low.
Eventually, market players said, the July contract would need to break out on either side of that trading range to attract more interest by roasters, producers and large funds.
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