NEW YORK, Nov 19 (Reuters) - U.S. cotton futures fell by
their 6-cent daily limit Friday morning as a decision by China
overnight to raise banks' required reserve ratios prompted some
pre-weekend liquidation.
The decline caught many market participants off guard
following Thursday's limit-up move and expectations of tighter
Chinese monetary policy already priced in the market.
'I'm real surprised the market has gotten pounded like this
because the China news was kind of what got us going down
earlier this week,' said Jobe Moss, an analyst for brokers and
merchants MCM Inc in Lubbock, Texas.
'I think that's the only thing you can really lean on ...
and the fact that the market is looking very poorly going into
the end of the week is probably causing more technical
liquidation,' he said.
The benchmark March cotton contract on ICE Futures
U.S. was trading down 6 cents, or 4.65 percent, at $1.2315 per
lb by 11:05 a.m. EST (1605 GMT).
China ordered lenders on Friday to lock up more of their
money with the central bank for the second time in two weeks,
stepping up its battle to pull excess cash out of the economy
before inflation has a chance to take off.
'Today is a big surprise,' said Mike Stevens, an
independent cotton analyst in Louisiana. 'I think people
yesterday felt very confident that the market had bottomed at a
logical place and the export sales were fantastic, considering
they were made at the top of the market.'
The U.S. Agriculture Department's weekly export sales
report showed total U.S. cotton sales at 566,700 (500-lb)
running bales, the 8th time in 9 weeks sales have topped
500,000 RBs.
'We sold nearly 80 percent of what we had projected to sell
for the whole season already, and yet the market failed, and
failed miserably last night,' Stevens said.
'Fridays are notorious for putting one side or the other's
feet to the fire, and, obviously, the bulls' feet are to the
fire today. It gives every appearance that there is more to go
to the downside,' he said.
For now, the U.S. cotton market is still the top performing
commodity on the Reuters Jefferies Commodity Index, up
more than 70 percent year to date.
(Graphic: http://link.reuters.com/kew48n)