Forexpros – Cotton futures rose for a third day on Wednesday, continuing to rebound from losses suffered in the wake of last week’s USDA report on global cotton supplies, as a weaker U.S. dollar and strong buying from mills boosted prices higher.
On the ICE Futures U.S. Exchange, cotton futures for March delivery traded at USD0.9261 a pound during European afternoon trade, gaining 0.42%.
It earlier rose by as much as 0.65% to trade at a two-day high of USD0.9283 a pound. Prices fell to a six-week low of USD0.9000 a pound on February 10.
Cotton prices were affected by outside influences, taking cues from the currency market, as the U.S. dollar weakened on hopes that Greece can deliver on a pledge to implement harsh austerity measures and after comments from the head of China’s central bank.
Demand for cotton, as a non-food agricultural commodity, is seen as more closely linked to economic conditions and consumer sentiment than that for other farm crops.
Market sentiment was boosted after People’s Bank of China Governor Zhou Xiaochuan said that he believes the euro zone’s challenges can be solved and that he fully supports measures taken by the European Central Bank during the crisis.
He also said that China will become more involved in efforts to resolve the crisis through mechanisms such as the European Financial Stability Facility, the euro zone’s rescue fund.
Meanwhile, investors awaited further developments surrounding Greece. Euro zone finance ministers cancelled a meeting planned for later Wednesday in Brussels and will hold a teleconference call instead to discuss the approval of Greece’s second bailout.
Sentiment found support on reports quoting Greek government officials as saying the leaders of Greece’s two biggest political parties are expected to provide European leaders written commitments by the end of the day to back austerity measures needed to secure aid.
Greece has a EUR14.5 billion bond repayment due on March 20 and requires the bailout funding in order to be able to make that payment and avoid a messy default.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.25% to trade at 79.36.
A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.
Cotton prices came under heavy selling pressure last week after the U.S. Department of Agriculture raised its forecast on global cotton supplies and lowered its outlook for world cotton consumption.
Elsewhere, on the ICE Futures Exchange, coffee futures for May delivery added 0.4% to trade at USD 2.0632 a pound, while sugar futures for March delivery dipped 0.1% to trade at USD0.2418 a pound.