Cotton futures surged on Monday to the highest in almost two months on short covering amid a weaker dollar and rising demand for the natural fibre. Technicals indicate shorts have "worn out their welcome," said Keith Brown, proprietor and cotton trader at Keith Brown and Co in Moultrie, Georgia. Traders said market sentiment has been buoyed by last week's export sales data, which showed a 144 percent week-on-week rise in sales of upland cotton and strong export numbers to China.
"While it was long expected that China's demand would fall off a cliff due to its policy change and internal sales, we see them alive and well importing cotton," Louis Barbera of ICAP Cotton said in a note. Data from the US Commodity Futures Trading Commission showed on Friday that speculators reduced a record bearish stance in cotton by 3,976 contracts to 37,134 in week to April 5.
The front-month May contract on ICE Futures US settled up 0.64 cent, or 1.07 percent, at 60.71 cents per lb, after hitting 60.83 cents a lb, the highest level since February 18. Total futures market volume fell by 9,335 lots to 50,458 lots. Data showed total open interest fell 5,211 lots to 217,706 contracts in the previous session. The dollar index was down 0.27 percent. The Thomson Reuters CoreCommodity CRB Index, which tracks 19 commodities, was up 0.46 percent.
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