* Cotton sees highest gains since Sept 29

* Prices break past a 10-day moving average

* USDA cancels October production reports

By Marina Lopes

NEW YORK, Oct 17 (Reuters) - Cotton futures notched up their biggest daily gain in three weeks on Thursday as mills swooped in to scoop up fiber and speculative investors raced to cover short positions after prices had touched six-weeks lows under 83 cents per lb.

The reversal was swift, taking just an hour for prices to lift 1.35 cents, or 1.6 percent, late in the session.

The most-active December cotton contract on ICE Futures U.S. closed up 0.66 cent, or 0.8 percent, at 83.82 cents a lb, after hitting an intraday low of 82.57 cents.

"We made these new lows and that's a trigger for more fund selling, said Jobe Moss, a broker with MCM Inc. in Lubbock, Texas. "Supposedly things were going to be tight, but now we've got cert stock climbing. That's a negative too."

Cert stocks totaled 48,819 as of Oct. 16, with another 46,182 awaiting review by the USDA, the most recent ICE data showed.

The U.S. dollar, battered by a 16-day government shutdown, plunged to its lowest in more than eight months, while U.S. stocks rose. Commodoties are often buoyed by a weaker dollar as investors can buy more of a dollar-denominated asset.

Fiber outperformed the broader commodity market, as the Thomson Reuters-Jefferies CRB index fell 0.41 percent on the day.

"We took out the previous session's lows, but we haven't been able to close below 83.10 cents. That would give people confidence we'll keep falling," said Moss.

Increased demand from mills and short covering by speculators pushed prices past their 10-day moving average of 83.90, but the weakened dollar provided minimal support.

"The dollar is tanking, but we are at harvest and that keeps the market from doing too much," said Jack Scoville, analyst at the Price Futures Group.

Despite the end of the federal government shutdown, the market remained in the dark, with USDA announcing it will cancel its monthly cotton production report and will not estimate production numbers until early November.

The Commitments of Traders report, typically due each Friday, will be delayed. (Reporting By Marina Lopes; editing by Josephine Mason and Leslie Gevirtz)