Cotton futures rebounded on Monday after hitting a three-month low hit early in the session as the low prices attracted buyers and concerns about shortfalls in the recently-harvested US crop drove nearby prices closer to par with forward contracts "We're at an area where we've got demonstrated demand," said Louis Rose, independent cotton trader and consultant with Risk Analytics in Memphis, Tennessee. The March-May spread tightened to its narrowest in 2-1/2 months, with March's discount falling to 0.46 cent per lb, reflecting concerns about the US 2015/16 crop, Rose said.

March cotton on ICE Futures US settled up 0.1 cent, or 0.16 percent, at 61.50 cents per lb, after falling as low as 62.28 cents a lb, its lowest level since October 9. Total futures market volume rose by 832 to 29,225 lots. Data showed total open interest fell 1,272 to 185,112 contracts in the previous session. Certificated cotton stocks deliverable as of January 8 totalled 64,142 480-lb bales, unchanged from the previous session.

The dollar index was up 0.22 percent. The Thomson Reuters CoreCommodity CRB Index, which tracks 19 commodities, was down 2.58 percent. Speculators cut their net long position to 36,516 contracts from 48,414 in the latest week. The Relative Strength Index in the most-active contract rose to 39.745.

Copyright Reuters, 2016