KCH posted a strong performance shaking off early weakness to settle 122.85, +3.05. A pre-8am EST dip took futures as low as 119.10, violating the 119.50 double bottom and replacing it with a new approximation of the Dec 13 lows at 119.00. Roasters were modestly engaged while origin showed up on our books in small clips. Global volatility was the story of the day as covering was underway early amongst the global short vol / short risk community. This appeared to provide an impetus for some of the short covering among several factors; while positioning alone – particularly after today’s OI report – was flagged by many as a reason for the rally, a spark was still required. Interestingly, the past couple days of losses in the equity markets – as well as this morning’s dreary call, followed by turnabout midmorning – may have provided a more reliable trading indicator for coffee. The BRL is traditionally one of the most sensitive global currencies to US equity weakness – quite possibly an extenuating factor in the blowout to 3.27, and later the retracement back in to 3.23. The BCB will announce an update to their Selic rate tomorrow, with expectations for a 25 bps cut, however much is up in the air with respect to the currency as concerns over pension reform mount. London closed $24 higher at 1804 basis RCH, while spreads tightened sending HK $6 higher to +34. Vietnamese selling was noted.
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