* March prices finish above 200-day MA for 2nd straight session

* Climb toward overbought territory caps day's gains

* Cotton poised to snap 2-year rout, post 13-pct gain in 2013

NEW YORK, Dec 30 (Reuters) - ICE cotton advanced on Monday, buoyed by speculator buying on chart signals and expectations that demand for U.S. cotton would stay strong and keep supplies tight in the world's top exporter.

The benchmark March cotton contract on ICE Futures U.S. closed up 0.54 cent, or 0.6 percent, at 84.66 cents a lb.

The March contract closed above its key 200-day moving average of 83.88 cents for a second straight session.

A climb near overbought territory kept the buying at bay throughout the session. The March contract's 14-day relative strength index rose for a second straight session to around 69.

Spot prices hit October highs of 85.20 cents a lb on Friday and were poised to snap a two-year rout and end the year up 13 percent.

ICE soft agricultural commodity futures and options will be closed on Wednesday for the New Year's Day holiday and cotton trading will open late at 8 a.m. EST on Thursday.

"The speculators have been buying this market as we crossed the moving averages, and there's a lack of selling from the farmers," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia.

Total market open interest reached 170,874 contracts on Friday, up slightly from the previous session's 169,007 lots, and at the highest levels in over a month, ICE data showed on Monday.

The pace of U.S. weekly export sales has been strong even as prices have climbed over 10 percent from last month's trough of 76.65 cents a lb.

Turkey's increased appetite for foreign fiber has been behind the strong U.S. cotton demand. The country has overtaken China as the biggest buyer of U.S. cotton so far this season, according to U.S. government data.

Even as producers are expected to renew their selling in January, U.S. supplies are expected to remain tight after farmers grew their smallest crop in four years.

"There is a shortage of available cotton right now, but I expect there will be more in the new year," said Jobe Moss, a broker with MCM Inc. in Lubbock, Texas.

Further, a sharp drop in exchange stocks in recent weeks has thrown the market into a backwardation, with nearby contracts trading at a premium to prices further out.

Certified stocks were unchanged at 35,315 bales on Friday, down from above 225,600 bales at the start of the month.

Recent gains have come even as China, the world's top buyer, is set to scrap its controversial stockpiling program in favor of direct farmer subsidies.

An overhaul of Beijing's policy could set global fiber prices up for a steep tumble, as the reserve-building program launched in 2011 has kept China's import appetite strong and world prices high, (Reporting by Chris Prentice; Editing by Chizu Nomiyama)