ICE arabica coffee shot to a seven-week high on Friday, notching its best weekly performance in more than three years, as the dollar slumped against the euro after the Federal Reserve launched its latest plan to revive the world's largest economy. Raw sugar and cocoa futures were also higher, buoyed by a rally in riskier assets such as gold and oil after the US central bank said it will buy $40 billion worth of mortgage debt a month until the US jobs market improves.
"The weak dollar is causing the euphoria," said Rick Alexander, vice president of trading at Chicago-based brokerage Zaner Group. A lower dollar makes it cheaper for holders of other currencies to buy dollar-denominated commodities. ICE December arabica coffee futures were up 0.02 cent, or 1.26 percent, at $1.811 per lb. Decent two-way traffic boosted volumes as technical buying and short covering continued to offset origin selling. Coffee notched a weekly gain of 11 percent, its biggest weekly rise since June 2009 when a crop shortfall in Colombia spurred fund buying. Arabica has rallied 18 percent since September 6 leaving the market close to bull territory, but technicians said this may not be the end of the market's 15-month downtrend.
Prices halved since soaring to all-time highs above $3 last May on falling demand as roasters have cut their use of the higher-priced beans in favour of cheaper robustas. "This is the biggest follow-through we've seen in a long, long time, but it's still in a long-term downtrend. The magic is if it closes over $2," said Alexander.
In the short term, the gains have reignited the market in Brazil, the world's largest producer, where harvesting is almost complete. Growers had waited in recent months for prices to recover before returning to the market to sell. November robusta coffee futures settled up $1 at $2,083 a tonne.
The buying spree occurred as the Fed's asset purchase program swept oil, copper and gold to multi-month highs. The Thomson Reuters-Jefferies CRB commodity index was up 1.16 percent at six-month highs. ICE October raw sugar futures settled up 0.2 cent, or 1.01 percent, at 19.91 cents per lb, off an intraday high of 20.25 cents. October white sugar on Liffe rose $7.3, or 1.3 percent, to settle at $576.5 per tonne ahead of the contract expiry on Friday.
A senior London-based white sugar trader said he expected under 100,000 tonnes of Brazilian sugar to be delivered against the contract. ICE December cocoa settled up $29, or 1.1 percent, at $2,642 per tonne, breaking a five-day losing streak due to profit taking, but down 1.3 percent on the week. Liffe December cocoa futures settled up 4 pounds or 0.24 percent at 1,692 pounds per tonne.