NEW YORK, Sept 15: Cotton futures in New York closed up for a second straight day on Friday, staging their best rally in three weeks, as the Federal Reserve’s third stimulus action for the US economy boosted it and a number of other commodity markets.

Prices of crude oil and copper hit multi-month highs, pulling along fellow industrial commodity cotton, a day after Fed Chairman Ben Bernanke pledged to buy $40 billion worth of mortgage debt every month until the US jobs situation improves.

“This is a Bernanke rally. With a QE3 announced, there’s a scramble to buy everything and those short on cotton had to rush to cover,” said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.

Cotton’s benchmark December contract in New York settled up 2.37 cents, or 3.2 per cent, at 75.90 cents per lb, moving between 73.53 and 75.95.

Stevens said the market could test 77 cents and above next week if it held to the current momentum. “As long as we don’t go below 74 cents, the high is open.” December cotton was down in the first three sessions of the week, hitting a one-month low by Wednesday, after the US government raised its estimate for global cotton stockpiles in 2012/13 to a new record. It rebounded slightly on Thursday, rising 0.3 per cent, after the US data revealed the country’s biggest weekly export sales for cotton since June.

The vast majority of those exports were headed for China, the first concrete sign since June that the world’s largest consumer of cotton may have resumed buying. Beijing has been preparing to kick-start its second year of buying, although it is also due to auction off some of its existing reserve to make room for new purchases.

It was not clear if the sales data released on Thursday were a result of Beijing’s efforts to replenish its strategic cotton reserve, or if mills have restarted importing after fresh licenses were distributed last month. Fundamentally, the outlook for cotton remains somewhat weak, despite the bullish mood for most commodities with the advent of the Fed’s third round of quantitative easing, or QE3.—Reuters