* Strong dollar keeps market on defensive
* Scale-down mill buying pares cotton losses

NEW YORK, March 2 (Reuters) - Cotton futures ended
lower Friday for the third session in a row in the face of a
stronger dollar and investor selling, and analysts said the weak
tone should persist into next week.
Benchmark May cotton on ICE Futures U.S. fell 1.44
cents or over 1.5 percent to conclude at 88.23 cents per lb,
trading from 87.80 to 90.50 cents. For the week, cotton shed
2.13 percent.
Volume traded Friday was around 18,100 lots, preliminary
Thomson Reuters data showed, down slightly from Thursday's tally
of 18,504 lots.
Sharon Johnson, senior cotton analyst at commodities
brokerage Penson Futures in Atlanta, Georgia, said the December
low around 84.25/35 cents would be a "valid target" for the
market.
"The dollar is very strong today and that is not
helping the cause a bit," she said.
Traders said the failure of key May to establish itself
above the 93 and 94 cents area of resistance prompted investors
to liquidate positions in the market.
Johnson and other dealers said some limited scale-down mill
buying has emerged at the market's lows and served to trim its
losses.
But players said the tendency of mills at this point would
be to wait for prices to bottom out before stepping back into
the market.
Cotton will also take its cue from the way outside markets
perform in the weeks ahead and this lineup of financial markets
would include global stocks, gold, crude and the grains complex.
Analysts said cotton players will also turn their focus to
the next USDA monthly supply/demand report due out March 9.
At the end of March, the USDA will then release its keenly
awaited potential plantings report.
Open interest in cotton, an indicator of investor exposure,
rose for a fifth session running to 173,611 lots as of March 1,
from the previous session's 172,767 lots, ICE Futures U.S. data
showed.