Cotton drops to over 4-year low on firm dollar, risk-off mood

Feb 3 (Reuters) - ICE cotton prices fell to a more than four-year low on Monday, weighed down by a stronger U.S. dollar and downbeat sentiment in the broader financial and commodity markets following U.S. President Donald Trump's tariffs on Canada, Mexico and China.

Cotton contracts for March CTc1 fell 0.26 cents, or 0.39%, at 65.62 cents per lb at 11:11 a.m. (1611 GMT), after dropping to its lowest level since October 2020 at 65.01 cents earlier in the session.

"The dollar is up about almost 2.5% from where it was just a few days ago, and that's pushing down all agricultural commodities that are exported," said Rogers Varner, president of Varner Brokerage.

The dollar =USD surged, while Chicago corn, wheat and soybeans fell after U.S. President Donald Trump imposed tariffs on Canada, Mexico and China, triggering fears of a broader trade war.

A stronger dollar makes greenback-priced cotton more expensive for overseas buyers.

Elsewhere, Wall Street's main stock indexes hit multi-week lows in broad-based selloff, while oil prices edged lower. .N O/R

Cotton prices are very cheap compared to other alternatives for the new crop, and this might severely curtail acreage in the US, Varner said.

Meanwhile, cotton speculators increased their net short position by 764 contracts to 61,235 in the week to Jan. 28, the Commodity Futures Trading Commission data showed on Friday. CFTC/