CSCE arabica coffee soared nearly 6 percent to a 3-month high near the close of trading Monday on options-related buying and industry purchases linked to a weak US dollar, floor traders said.
"Technically, the market looks positive, but it's still in its 55-70 range. Early volume was only 5,000 lots or so, but the strong showing may attract more longs," said Ann Prendergast, softs analyst with Refco, Inc.
Weakness in the US dollar generated buying by European roasters Monday who found our the market more attractive, brokers said.
Volume swelled to more than 17,000 contracts by 12:00 EST, about 30 minutes before the closing bell and futures climbed over the 67.50-cent option strike price, which generated more futures buying, traders said.
Benchmark March arabica futures rose 3.65 cents per lb to settle at 68.60 cents. It traded from 64.00 to 68.80 cents, the contract's highest since October 2, 2003.
Coffee futures spent much of 2003 on the defensive in the face of high supplies and tepid demand.
But the beans had a strong short-covering rally in early December as commodity funds were caught holding too large of a bearish bet.
Funds held a net speculative short futures position of 10,044 contracts in the December 22 week, and some traders said this may have added to Monday's advance.