* Fiber registers 7th straight session gain
* Prices continue climb to highest since May 2012
* USDA may increase demand figures after recent export levels - broker
NEW YORK, March 6 (Reuters) - Cotton prices gained for a seventh straight session on Wednesday, touching a 10-month high, as expectations of strong demand and mill buying supported a recent rally that has been fueled by speculators' bullish investment.
The most-active May cotton contract on ICE Futures U.S. rose 0.26 cent, or 0.3 percent, to settle at 87.24 cents per pound after earlier climbing to 87.59 cents, the highest level since May 7, 2012.
Even as the U.S. dollar gained and other commodities fell, cotton continued its upward climb on expectations that the U.S. government may increase consumption figures in its monthly crop report on Friday, thanks to recent export levels.
"I think they're going to increase the consumption estimate. The increase on the demand side will help gobble up the excess supplies," said Michael Smith of T&K Futures & Options, a Port Saint Lucie, Florida-based brokerage.
Last month, cotton rose after the U.S. Department of Agriculture increased its forecasts for Chinese cotton stocks, where more than half of the world's cotton is held, and U.S. export levels at the end of the current marketing year, as a result.
Since then, merchants have said that cash cotton prices and solid global demand have helped buoy the futures market, even as prices continued to increase.
Cotton has risen each of the last seven sessions, its longest string of daily gains in over a month. Wednesday's increase came even as the U.S. dollar index rose against a basket of six other currencies, adding pressure to commodities, and the entire Thomson Reuters-Jefferies CRB commodity index fell to its lowest since July 2012.
"As the dollar continues to strengthen, we'll see weakness throughout commodities. The ones bucking that trend like cotton are responding to supply and demand," Smith said.
Fiber has surged nearly 14 percent since the start of the year, largely driven as noncommercial dealers boosted bullish bets in cotton futures and options to their highest since September 2010 last month.
Prior to the year-to-date surge, cotton posted two annual losses as high prices encouraged mills to turn to lower-priced manmade fibers and global surpluses climbed.
Recent rising prices have prompted merchants to list more cotton against the U.S. exchange. Certified stocks totaled nearly 437,000 480-lb bales on Tuesday, according to ICE data. That represented a steep increase from fewer than 8,000 bales in mid-October and the highest levels since June 2010.
