* Stronger dollar keeps cotton on defensive
* Weak outside markets enhance negative sentiment
* Market eyes USDA export sales data Friday
NEW YORK, July 5 (Reuters) – Cotton futures finished weaker Thursday on investor liquidation as a firmer dollar and sour tone to commodity markets depressed fiber contracts for the first time in five sessions and is seen keeping cotton on the defensive, analysts said.
The benchmark December cotton contract on the ICE Futures U.S. exchange fell 2.02 cents or by 2.8 percent to finish at 70.58 cents per lb, dealing from 70.31 to 72.75 cents.
Volume traded on Thursday stood at almost 13,000 lots, almost two-thirds under the 30-day norm, Thomson Reuters data showed.
“It looks like they’re (investors) trading the short side (given) the strength of the dollar,” said independent cotton analyst Mike Stevens in Mandeville, Louisiana.
The euro slumped to a one-month low versus the dollar after the European Central Bank cut its main interest rate to a record low.
Stocks also weakened as investors looked for more clues on what the Federal Reserve may do to shore up the U.S. economy as stimulus measures by global central banks fell flat.
Traders said some in the market were waiting for release of Friday’s U.S. Agriculture Department weekly export sales data.
Market reaction though is expected to be muted and given that the 2011/12 marketing season (August/July) is almost over.
Open interest in the cotton market, an indicator of investor interest, amounted to 191,881 lots as of June 15, the exchange said.
Next week, the market will be turning its focus on the monthly USDA report as it refines its figures before the start of the 2012/13 marketing year.
Volume traded on Wednesday stood near 26,100 lots, less than 10 percent under the 30-day norm, Thomson Reuters data showed.
(Reporting by Rene Pastor)