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Cotton hovers near 3-1/2-year low as U.S.-China trade tensions simmer

Aug 6 (Reuters) - ICE cotton futures fell on Tuesday and were holding near 3-1/2-year lows touched in the previous session, hurt by growing trade tensions between the United States and China, with the natural fiber facing demand woes.

* The most-active cotton contract on ICE Futures U.S., the

second-month December contract , fell 0.19 cent, or

0.32 %, to 58.29 cents per lb as of 12:45 p.m. EDT (1645 GMT).

* The contract touched its lowest since March 2016 at 57.26 cents a lb in the previous session.

* U.S. President Donald Trump on Tuesday vowed to protect American farmers against China by signaling to provide further aid if needed, a day after Chinese firms stopped agricultural purchases and Beijing threatened more tariffs on U.S. farm products.

* Cotton has fallen more than 8% since Aug. 1 and by over 20% so far this year owing to a drawn-out trade war between the world's top consumer of the fiber, China, and one of the biggest producers, the United States.

* "The market is just continuing to show signs of weakness," said Bailey Thomen, cotton risk management associate with INTL FCStone, adding that the trade war between the two countries has hit the demand for the natural fiber.

* Increased open interest in the December contract shows that new short positions are entering the market, Thomen said.

* Speculators cut their net short position on cotton futures and options from record levels in the week to July 30, data from the U.S. Commodity Futures Trading Commission showed on Friday.

* Total futures market volume fell by 30,633 to 17,506 lots. Data showed total open interest gained 1,328 to 203,273 contracts in the previous session.

* Certificated cotton stocks <CERT-COT-STX> deliverable as of August 2, totaled 28,088 480-lb bales, down from 28,823 in the previous session.

* Meanwhile, the U.S. Department of Agriculture in a weekly crop update said 54% of the U.S. cotton was in good-to-excellent condition, falling from last week's 61%.

(Reporting by Nallur Sethuraman in Bengaluru; editing by Jonathan Oatis)