The cotton futures benchmark rose more than 21% on Tuesday as investors cheered the news that the U.S. is poised to get a $20 billion loan from China.
The greenback is up nearly 8% against the dollar and the benchmark cotton futures were up nearly 19% after the Federal Reserve’s decision to extend its $1.6 trillion bond-buying program.
The dollar is up 1.4% against a basket of currencies and the basket of commodities is up 5.9%.
“There’s still a long way to go for cotton futures to bounce back to where they were at this time last year,” said Jeffery D. Stover, head of commodities research at Wedbush Securities.
“It’s very encouraging for investors to see the price of cotton up,” he added.
Cotton futures are a major driver of the U,S.
economy, and a key commodity for the global food system.
China has been a major investor in cotton futures for years, buying the cotton to be used in processed foods.
But the price has fluctuated wildly in recent years as demand for cotton has slumped due to drought and other factors.
It’s not clear whether China will be able to keep up its support as U.N. leaders and other countries consider how to respond to the devastating drought.
The United States is also under pressure from other nations to cut its dependence on China as a major source of oil, gas and minerals.
U.K. Prime Minister David Cameron recently said he wanted to cut the U and China’s trade ties, but it remains unclear if the U will be willing to do so.
China is also seeking to cut a deal on tariffs and other trade restrictions that are hurting its domestic economy.
The U.k. and U.A.E. are negotiating on a deal that would allow the two countries to free trade on some goods.