Cotton futures for May delivery ended 3.5% higher at $2.0596 a pound after falling 0.2% the previous trading session.

Cotton prices were firming up on official data showing heavy rains will the major agricultural region of eastern Australia -- just as the harvests are set to begin -- in the coming months through June.

Both the British pound sterling and the Australian dollar were gaining against the U.S. dollar amid easing concerns about Japan's nuclear issues and strong inflation data from the U.K.

The pound was strengthening against the dollar by 0.4% at $1.6381 and the Australian dollar was up 0.5% at $1.01143.

U.K. inflation jumped to a 28-month high at 4.4% in February, stoking expectations inflation hawks will only grow louder in the coming weeks.

The higher-yielding Australian dollar gained momentum against its U.S. counterpart as the Nikkei led Asian equities advances earlier, restoring certainty in the markets in the aftermath of the massive earthquake and tsunami.

Catastrophe bonds with Japanese exposure, issued by reinsurers such as Munich Re and Swiss Re ( SWCEY) may escape from the Japan earthquake unscathed, according to Bloomberg.

Catastrophe bond returns compare with global gains of 54% since March 2006 for Bank of America's ( BAC) Global High-Yield Index and the UBS ( UBS) Bloomberg Constant Maturity Commodity Index, according to Bloomberg.

When the earthquake hit, Reuters reported that eight related catastrophe bond transactions involving major reinsurers -- and totaling more than $1 billion in value -- may have been triggered. In high-yielding catastrophe bonds, issuers may be forgiven of interest or principal payments to their lenders if the borrowers suffered losses from the catastrophe defined within the terms of the bond agreement. In this case, they were feared to be facing big losses from the 8.9 magnitude earth quake. Bond issuers named by Reuters included Munich Re, Scor ( SCRYY) ( SZCRF ), Flagstone Reinsurance ( FSR) and Swiss Re.

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-- Written by Andrea Tse in New York.

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