ICE cotton gained for a second straight session on Tuesday, a day after its sharpest rise in 8-1/2 weeks, as speculators continued covering short positions and the US dollar weakened. The most-active front-month March cotton contract on ICE Futures US gained 0.16 cent, or 0.3 percent, to settle at 58.78 cents a lb. It was the first time fiber rose for two consecutive days in more than two weeks.
Cotton rose 2.3 percent in the prior session in response to a US Commodity Futures Trading Commission report released Friday after market close showing that speculators had increased their net short position in cotton to the highest level in four months, prompting a bout of short-covering. Some of that short-covering continued into Tuesday, said Peter Egli, director of risk management at British merchant Plexus Cotton Ltd.
"The specs still need to cover some more," Egli said. "We're not quite done yet. The specs are now trying to get out of some shorts, and the trade doesn't want to go short." Egli noted that strong US export sales in recent weeks have brought the marketing year total to 8.4 million bales of upland cotton, a large percentage of the US Agriculture's forecast of 10 million bales for 2014/15. There are still six months left in the marketing year, which ends July 31.
In addition, the dollar fell for a second day, pressuring fiber prices. A stronger dollar weighs on greenback-traded commodities by making them more expensive to holders of other currencies. India, the world's second-biggest producer of cotton, began auctioning off portions of government stocks of around 5 million bales on Tuesday. Its decision to sell fiber could weigh on futures prices, though traders said the 5,100 bales it put up for auction on Tuesday was too small an amount to significantly impact prices.
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