Forexpros – Cotton futures regained strength on Tuesday, rebounding from a one-week low as hopes for near-term stimulus in top fiber consumer China underpinned expectations Chinese cotton demand will remain strong.
On the ICE Futures U.S. Exchange, cotton futures for March delivery traded at USD0.9633 a pound during late European morning trade, jumping 0.91%.
It earlier rose by as much as 1.1% to trade at a two-day high of USD0.9644 a pound.
Prices slumped to a one-week low of USD0.9416 on Friday after the U.S. Department of Agriculture raised estimates on global cotton inventories to 58.35 million bales from 57.67 million.
Agricultural commodity markets remained closed on Monday for the Martin Luther King Jr. holiday.
Prices regained strength after government data released earlier showed that China’s economy expanded at an annualized rate of 8.9% in the fourth quarter, slowing from the previous quarter’s 9.1% rate, but slightly better than expectations for an 8.8% increase.
While the data was better-than-expected, the nation’s economy grew at the slowest pace in more than two years and expanded less than 9% for the first time since mid-2009, fuelling speculation that Beijing was likely to ease monetary policy to stimulate growth.
Prices found further support after the China Cotton Association said Monday that domestic cotton sowings were forecast to decline by 10.5% from a year earlier to 5.2m hectares in the current marketing season, boosting speculation China will increase its reliance on cotton imports.
Official trade data released last week showed that China’s December cotton imports rose 71% from a year earlier to 790,400 tonnes. China is both the world’s largest producer and consumer of the fiber.
Cotton traders have been focusing on prospects for increased Chinese demand in recent months after the country started a cotton stockpile in September to protect domestic farmers’ interests.
Meanwhile, commodity prices received a lift as risk sentiment improved following better-than-expected euro zone data and a successful Spanish debt auction.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, retreated 0.7% to trade at 81.09.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
Elsewhere, on the ICE Futures Exchange, coffee futures for March delivery rallied 1.77% to trade at USD 2.2882 a pound, while sugar futures for March delivery gained 0.61% to trade at USD0.2393 a pound.
Forexpros
