SOFTS-Coffee, sugar perk up on weak dollar; cocoa slumps

Stronger pound drags on London cocoa futures

* Traders digest scrapping of MMTC raw sugar buying tender

* Coffee retraces up from previous 6-week low (Writes through with U.S. comments and closing prices for ICE markets, adds byline, dateline)

NEW YORK/LONDON, Feb 19 - The weaker U.S. dollar acted as a springboard for coffee and sugar futures Thursday, while it dragged on the London cocoa market.

Most of the soft commodities retraced Wednesday's multi-week lows on the currency move, said Boyd Cruel, senior softs analyst for Alaron Trading in Chicago.

U.S. cocoa futures were buoyed by the firm sterling against the greenback for much of the session, but inched down to a four-week low in choppy dealings, succumbing to chart-based pressure, traders said.

While much of the activity in robusta futures centered on rollover business, both robusta and arabica markets rebounded from Wednesday's six-week lows amid industry scale-down buying, with physical buyers noted as taking advantage of recent falls in coffee values.

Demand prospects for coffee appeared to be resilient despite the global economic downturn, dealers said.

"People may resist buying a pair of jeans, but they'll still buy a coffee," one dealer said.

ICE May arabicas closed up 0.90 cent at $1.1250 per lb, while London May robustas settled up $13 at $1,586 per tonne.

The dollar fell sharply against the euro as hopes grew that Germany may help some of the weaker economies in Europe.

The sugar trade was focused on Indian import demand for raw and white sugar as the world's number one consumer of the sweetener has swung from being a net exporter to importer.

"You suspect that the (price) trend is going to continue to be higher with some high volatility," said Nick Hungate, a soft commodities trader with Rabobank.

INDIA
Indian sugar futures extended gains into a sixth day to contract highs after state-run MMTC Ltd scrapped an import tender and on talk national output might fall to a lower-than-expected 17 million tonnes.

Sugar traders said MMTC had canceled tenders because bids were too high, but was expected to return to the market later.

ICE May raw sugar finished up 0.16 cent at 13.17 cents per lb, while London May white sugar settled $10 higher at $394.00 per tonne.

"It gave back all of its losses from yesterday, and (was) supported by the weaker dollar. When it gets above 13.00 (cents), it sort of loses its fire power so we don't get as much buying above this level," Alaron's Cruel said, referring to the March raw sugar contract.

In cocoa, dealers said the strength of the pound against the dollar had dragged on the London market but buoyed U.S. futures for much of the session, before chart-based selling pushed the market to a four-week low for the second straight day.

Sterling rose against the dollar, in-part on hopes that a U.S. housing bailout plan will help to boost the global economy, reviving investors' risk appetite a little.

However, dealers saw a risk of a fund-driven sell-off in cocoa futures markets as bean arrivals at West African ports had picked up lately, and concerns over the outlook for consumption in the economic slowdown were growing.

London May cocoa closed down 24 pounds to 1,848 pounds per tonne, while ICE May cocoa inched down $1 to close at $2,570 per tonne, the lowest since Jan. 20 for the second position.