SOFTS-ICE sugar, cocoa edge up on hopes of U.S. budget deal

* Cocoa remains stuck in tight range

* Potential for further short-covering in arabica

(Adds quote, updates prices)

LONDON, Nov 29 (Reuters) - Raw sugar and cocoa futures on ICE edged higher on Thursday, in line with firm commodity markets, as hopes grew that the United States would avert a fiscal crisis, while coffee was steady.

World equities hit a three-week high on Thursday as optimism grew that U.S. political leaders would eventually reach a deal to avoid a fiscal crisis which threatens to derail growth in the world's biggest economy.

"We have been trading in line with the macroeconomic headlines lately," said Andrey Kryuchenkov, analyst at VTB Capital.

"This optimism over the U.S. avoiding a fiscal cliff is not going to carry on forever. I do think they will agree, but the point is that no one will be prepared to short the dollar until we have complete certainty on this."

A weaker dollar is supportive of dollar-priced commodities, making them cheaper in foreign currencies.

March raw sugar futures on ICE was up 0.12 cent or 0.6 percent to 19.28 cents a lb at 1501 GMT.

"With the macro picture improving as a result of increasing optimism in the U.S. that political parties are attempting to compromise ahead of the fiscal cliff, stocks and other commodities held their ground or improved," said Nick Penney of brokerage Sucden Financial.

"This background may also have helped sugar avoid the drop through 19 cents to support at around 18.90 but the subsequent rally has been anaemic, to say the least."

Dealers and analysts said the market was expected to remain stuck below key technical resistance of around 20 cents as the outlook for a large 2012/13 global surplus weighed.

"We had a small attempt to get above 20 cents in mid-November... and then it just remained rangebound because there's no fundamental news and nobody is expecting anything now," said Kryuchenkov.

"We're just going to wait to see more news in the New Year on crops."

March white sugar on Liffe rose $2.90 or 0.6 percent to $512.50 per tonne.

COCOA TRENDLESS

Cocoa futures on ICE were higher with March up $35 or 1.5 percent at $2,494 a tonne.

Dealers said both the London and New York markets remained range bound, without clear technical or fundamental direction, trendless since December 2011.

Benchmark Liffe March cocoa futures were up 14 pounds or 0.9 percent at 1,585 pounds per tonne.

"Support is towards 1,550 pounds, resistance is towards 1,600 pounds, so the range is narrowing but there's still no sign of a concerted break out," said a U.K.-based broker.

March arabica coffee futures eased 0.1 cent or 0.1 percent to $1.5475 per lb. The contract slumped to $1.4710 on Wednesday, the lowest level for the benchmark second month since June 2010, before a short covering rally trimmed losses.

Dealers noted that the large net short position in arabica futures and options built up by speculators in recent weeks could see further short-covering in the near term, although market fundamentals remained bearish with ample supply.

"It's just a question of whether we'll see enough follow-through to get more of a substantial rally," said a London-based broker.

January robusta coffee futures were down $1 or 0.1 percent at $1,934 a tonne.

Vietnam's harvest is now in full swing and the recent rebound in prices was expected to incentivise origin selling.

"It's probably around where origin are going to be so it's going to be tougher (for the market to rise) from here on," said the broker.

(Reporting by Sarah McFarlane; Editing by Alison Birrane)