ICE cotton falls as dollar strengthens & global demand wavers

07 Aug '24

2 min read

ICE cotton falls as dollar strengthens & global demand wavers

Pic: Adobe Stock

Insights

ICE cotton continued its decline for a second day, driven by a stronger dollar and global geopolitical concerns.
Cotton demand fears in Bangladesh and China also weighed on the market.
The December contract closed at 67.30 cents per pound, down 0.48 cent.
The dollar's recovery stabilised financial markets but pressured agricultural commodities.

ICE cotton continued its downward trend for the second consecutive day yesterday. A stronger dollar index and geopolitical conditions contributed to weakness across commodities, including cotton. Concerns about cotton demand in Bangladesh and China also dampened market sentiment.

Yesterday, the ICE cotton December contract settled at 67.30 cents per pound (0.453 kg), down 0.48 cent. It remained under pressure due to pessimistic conditions. US cotton has seen a loss of 225 points in the last five trading sessions.

Yesterday, the dollar recovered against most major currencies from lower levels. The reversal in the dollar brought stability to financial markets but exerted pressure on agricultural commodities.

The trading volume yesterday was 26,764 contracts, with 38,580 contracts cleared, indicating active market participation. Open interest, which had seen 21 consecutive increases adding 22,664 contracts, dropped by 4,496 contracts over the past three sessions, bringing it to 226,861 contracts, down by 2,876 yesterday. The drop in open interest might be due to some profit-taking from record short positions.

Certified cotton stocks remained unchanged at 18,991 bales, providing stability in available inventory.

On the weather front, Hurricane Debby poses a concern for cotton growers in Georgia and the Carolinas, though only minor damage is expected. The highest risk from the hurricane is flooding in low-lying areas, but growers remain optimistic due to generally favourable weather conditions and healthy-looking crops.

Traders expressed concerns about the situation in Bangladesh, which could impact cotton prices. Bangladesh is a significant market for cotton. While political unrest may affect demand, it is too early to confirm this.

Markets are waiting for stability around the world, with a major focus on economic issues. Demand remains weak, and traders are awaiting the US Cotton export sales report due tomorrow.

On Wednesday, ICE cotton for December 2024 was traded at 67.18 cents per pound, down 0.12 cent. Cash cotton settled at 61.70 cents (down 0.35 cent), the October contract at 66.20 cents (down 0.35 cent), the March 2025 contract at 68.94 cents per pound (down 0.01 cent), the May 2025 contract at 70.14 cents (down 0.03 cent), and the July 2025 contract at 71.05 cents (down 0.03 cent). A few contracts remained at the same level as the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)

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