NEW YORK, Oct 25: Cotton futures settled lower Friday on renewed investment fund sales sparked by sinking equity and commodity markets and a rallying dollar as players were plummeted by global recession jitters, brokers said.

The key December cotton contract lost 2.85 cents, or 5.8 per cent, to close at 46.23 cents per lb, dealing from 46.08 to 49.10 cents. On the weekly charts, it was the lowest close since late June 2006.

March dropped the 3.00-cent limit to 50.32 cents.

Volume traded in the December contract stood at 10,489 lots at 2:43 p.m.

This doesn’t augur well for cotton, said Mike Stevens, an analyst for brokers SFS Futures in Mandeville, Louisiana.

He said that cotton had begun divorcing itself from the fear-driven selling spree which has hit world financial markets, but fiber contract players suffered a relapse when recession fears again became the driving force in cotton.

The way the market closed, Stevens said cotton should suffer further losses when trading resumes next week.

A trading house report said “commodity markets have been and still are under severe selling pressure stemming from hedge and index fund liquidation.

Nobody knows how much more these entities have to sell, but we are probably not at the end of it yet,” the report concluded.

A report by Sharon Johnson, cotton expert for First Capitol Group in Atlanta, Georgia, said “cotton may not and probably will not be able to differentiate itself either if another wave of wholesale liquidation cuts across the board, especially in the face of another new leg up in the US dollar.

The fall in prices could impact US cotton plantings in

2009, which may again decline as farmers opt to sow soyabeans, corn or wheat because returns there are better.

Brokers see support in the December contract at 46 and the lifetime low of 45.66 cents. Resistance was at 47 and 47.40 cents, they said.

Volume traded in the cotton market Thursday was 22,810 lots, exchange data showed. Open interest in the cotton market rose 1,498 lots to 171,546 contracts as of Oct. 23, it said.—Reuters