Stronger dollar pressures ICE cotton prices; oil gains cushion fall

Yesterday, the ICE cotton May 2025 contract closed at 66.35 cents per pound (0.453 kg), down 0.12 cent, extending its three-session decline to a total of 102 points. July cotton futures slipped by 0.04 cent to settle at 67.84 cents per pound, while the December contract also edged down 0.04 cent, closing at 69.52 cents.

The US dollar strengthened on Wednesday following the Federal Reserve’s decision to maintain interest rates. A stronger dollar makes cotton purchases more expensive for overseas buyers. However, the increase in crude oil prices supported cotton prices, as higher oil prices raised polyester production costs.

The trading volume for cotton futures was 38,478 contracts, compared to 36,431 contracts cleared the previous day. ICE deliverable No. 2 cotton futures contract stocks remained unchanged at 14,488 bales as of March 18.

Market analysts noted that the strength of the dollar was a negative factor for the cotton market. Recent price highs required a catalyst to drive prices further.

Investors are awaiting the USDA's weekly export sales report, scheduled for release on March 20, for further insights into cotton demand. The previous USDA report showed that US cotton export sales for the current marketing year increased by 271,800 bales, up 13 per cent from the previous week and the four-week average. Export sales for the next marketing year increased by 110,200 bales in the same week.

US stocks surged after the Federal Reserve kept interest rates unchanged, as investors assessed the impact of US tariffs on the economy and inflation.

The market has not entirely dismissed the possibility of a continued rally, as recent losses have been relatively modest.

Currently, ICE cotton for May 2025 is trading at 66.70 cents per pound (up 0.35 cent), cash cotton at 63.85 cents (down 0.12 cent), the July 2025 contract at 68.17 cents (up 0.33 cent), the October 2025 contract at 69.43 cents (down 0.11 cent), the December 2025 contract at 69.78 cents (up 0.26 cent), and the March 2026 contract at 70.77 cents per pound (up 0.14 cent). A few contracts remained at the same level as the last closing, with no trading recorded today.

Fibre2Fashion News Desk (KUL)