US cotton futures finished lower on Monday on light follow-through investor sales and news of an interest rate rise in top consumer China, analysts said. The market may see further choppy trade in the last trading week of 2010 as most large investors have already closed their books and will not return until after the New Year.
-- Chinese rate rise weighs early on cotton
The cotton market on ICE Futures US was closed last Friday for Christmas. The key March cotton contract dropped 2.36 cents to end at $1.4576 per lb on volume of around 13,000 lots, which is about half the 30-day average, Thomson Reuters preliminary data showed. "It was follow-through (pressure) from last week," Sharon Johnson, senior cotton analyst at commodities brokerage Penson Futures in Atlanta, Georgia.
The market was also pressured by a fresh interest rate increase in China. The December 25 rate increase by the People's Bank of China was the second in just over two months, and while the timing just before year-end may have been a surprise, the move itself was not. "We were down initially ... on China," said Johnson, but then the market pared its losses as players digested the move and strong soybean futures alleviated the bearish impact of Beijing's decision.
"It may be very quiet and choppy (the rest of the week)," she added. Analysts said many market players would also be away next week to attend the annual Beltwide Cotton conference in Atlanta. They said market focus would also increasingly turn to prospective US cotton plantings in 2011, coming as it does after the market's performance in 2010 when cotton values hit all-time highs.
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