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ICE Cotton Ends Weak On Dollar Strength; Eyes On Export Sales Data

21 Feb 2020 8:18 am
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Mumbai (Commodities Control) – Cotton futures fell on Thursday as a stronger U.S. dollar, which makes cotton more expensive in export markets, weighed on the natural fiber, while traders awaited federal export sales data.

March Cotton closed at 68.75 cents, up 27 cents points, while cotton contracts for May settled down 28 cents at 69.37 cents per lb. It traded within a range of 68.88 to 69.81 cents a lb.

July Cotton ended at 70.24 cents/lb, down 23 points and October Cotton closed at 69.64 cents, up 2 points.

"The (Chinese) Yuan being 7-1 against the U.S. dollar is not a good sign for commodities in the U.S. and the fundamental issue with our markets right now is how do we grow exports in an environment where the dollar is so strong?" said John Payne, senior broker at Daniels Trading.

The yuan weakened to a more than two-month low of 7.0289 against the dollar at one point in Thursday morning trade.

Intensifying virus worries, South Korea has become the latest victim of coronavirus outside China, with 104 confirmed cases of the flu-like virus so far, and reported its first death.

Even as the number of new coronavirus cases in China slowed, new research suggesting the virus was more contagious than previously thought added to the alarm.

The United states is the biggest exporter of cotton, while China is the biggest consumer.

The U.S. Department of Agriculture on Thursday projected U.S. cotton plantings at 12.5 million acres in 2020.

"The acreage numbers (for cotton) are bullish, the problem right now is that corn prices need to stay up because if corn prices fall, then that could push more acreage towards cotton," Payne added.

Investors now eye the weekly export sales report from the U.S. Department of Agriculture due on Friday. Since last November, sales have averaged some 250,000 bales per week. Last week’s amounts exceeded some 350,000 bales, with Vietnam taking 175,000 bales. Another dynamic number Friday ought to encourage cotton to trade higher not only Friday, but into next week.

Total futures market volume fell by 6,705 to 39,843 lots. Data showed total open interest gained 670 to 207,560 contracts in the previous session.

Support and Resistance for the active contract lies at 68.42 cents and 70.28 cents/lb, respectively.

(Commodities Control Bureau)

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