NEW YORK, Jan 3 (Reuters) - Cotton futures finished up
and at a 1-1/2 week high on Tuesday, fueled by sharp gains in
agricultural commodities across the board and expectations of
buying related to index rebalancing, analysts said.

The key March cotton futures went up 4 cents or 4.4
percent to finish at 95.80 cents a lb, dealing from 91.85 to
95.80 cents. It was the highest settlement for cotton's spot
contract since Nov. 17, Reuters data showed.

Traded volume on Thursday was around 25,000 lots, almost
doubled its 30-day norm, Thomson Reuters preliminary data
showed.

'There is expected to be an uptick in the weighting of
cotton in the major indexes. This should translate into some
market strength over the first few weeks of the year,' VIP
Commodities analysts said in a note.

Some investors are buying cotton in anticipation that
investment funds would increase the share of cotton in their
portfolios when reweighting of assets getting the most funds
gets underway later in January.

At the start of every year, the world's commodity index
managers go through the annual rite of rebalancing their mix,
shifting ratios that can swing billions of dollars from one
market to another.

Cotton ended 2011 as the worst-performing commodity market
of the year, falling around 37 percent from 2010 as a brief
rally to record prices boosted output and decimated demand while
a shaky global economy scared off investors.

Since scaling a record top over $2.20 a lb in early March,
cotton demand has shrunk and prices have more than halved.

Total volume traded Friday reached 8,087 lots, versus the
prior tally of 10,657 lots, ICE Futures U.S. data showed.

Open interest, an indicator of investor exposure, was at
152,144 lots as of Friday, against Thursday's level of 151,731
lots, exchange data showed.