Investing.com - U.S. soft futures rose sharply on Wednesday, the first trading session of 2013, as the U.S. dollar came under heavy selling pressure after U.S. lawmakers managed to push through a last-minute budget deal, thus averting the effects of the fiscal cliff.
Farm commodities drew strong support from a broadly weaker U.S. dollar, after the U.S. House of Representatives voted Tuesday night in favor of a deal to avert the fiscal cliff, blocking a series of looming tax increases and spending cuts that could have pushed the U.S. economy back into a recession.
The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, was down 0.5% to trade at 79.49, close to a two-week low.
A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.
On the ICE Futures U.S. Exchange, cotton futures for March delivery traded at USD0.7601 a pound, up 1.8% on the day. The March contract rose by as much as 2% earlier in the session to hit a daily high of USD0.7604 a pound.
Demand for cotton, as a non-food agricultural commodity, is seen as more closely linked to economic conditions and consumer sentiment than that for other farm crops.
Meanwhile, Arabica coffee for March delivery traded at USD1.4755 a pound, up 2.5% on the day. The March contract rallied by as much as 2.9% earlier in the day to hit a session high of USD1.4815 a pound.
Coffee prices tumbled to USD1.4127 on December 31, the lowest level since June 2010, amid concerns global supplies of the bean are more than ample to meet demand.
Elsewhere, sugar futures for March delivery traded at USD0.1968 a pound, adding 0.7% on the day. The March contract rose by as much as 0.75% earlier to trade at a session high of USD0.1968 a pound, the strongest level since December 4.
March sugar prices rallied more than 7% since hitting a two-and-a-half-year low of USD0.1830 a pound on December 13, as market players closed out bets that prices would fall further after futures moved into oversold territory.
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