By Julie Wernau
Cocoa futures jumped higher Tuesday as the dollar fell, boosting demand ideas for dollar-denominated goods like cocoa from markets around the world.
Cocoa for March delivery rose 1.2% to close at $2,103 a ton on the ICE Futures U.S. exchange, its first rise in five sessions.
The Wall Street Journal Dollar Index lost 0.7% Tuesday against a basket of currencies over fears about how U.S. President Donald Trump's protectionist policies could impact the economy. A weaker dollar against other currencies makes dollar-denominated goods like cocoa more affordable for other chocolate consuming nations around the world.
The dollar index snapped a three-month winning streak this month, losing 2.6% this month, it's largest percentage decline since March 2016.
The weakened dollar is a welcome boost for cocoa, which has seen prices drop sharply this year on the back of bumper crops in West Africa, coupled with recent data that pointed to weaker-than-expected demand for cocoa.
In particular, the euro's 2.64% traction against the dollar this month is a boost for cocoa, as Europe is the commodity's largest consumer.
"Ideas are that there is plenty of cocoa available to the world market, but the demand has fallen and needs to be rebuilt after the strong prices of last year," said Jack Scoville, vice president of Price Futures Group in Chicago.
Last week, the International Cocoa Organization released figures showing that stocks of cocoa beans held around the world fell by 13,000 tons to 1.477 million tons at the end of the season ended Sept. 30, 2016, with about 80% of stocks held in cocoa importing countries.
Thesurvey results triggered a five-day sell off in the cocoa market, with the ICCO saying the anticipated cocoa supply deficit was smaller than it had expected and will likely be revised in its next update at the end of February.
In other markets, raw sugar for March ended up 0.7% at 20.45 cents a pound, arabica coffee for March was down 1.1% to close at $1.4955 a pound, frozen concentrated orange juice for March lost 2.8% to end at $1.729 a pound, and March cotton rose 1.1% to settle at 74.94 cents a pound.
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(END) Dow Jones Newswires
January 31, 2017 18:01 ET (23:01 GMT)
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