A strong dollar and jitters over funds' next moves kept a lit on cocoa prices on Friday despite data showing that North American demand had, at last, escaped the grip of recession.

The region's cocoa grind - a measure of industry demand for the chocolate ingredient - jumped 16.2% to 116,122 tonnes in the first three months of the year, the US-based National Confectioners Association said.

The rise end a run of four successive quarters of declines, as consumption fell amid the global downturn, prompting chocolate makers to ease off capacity and lower stocks.

It also beat industry forecasts of 3-12% growth, and followed data earlier this week showing Europe's grind growing by 8.1% for the quarter.

Rally fades 

However, while cocoa opened brightly, gaining 2% early deals in New York in, it had lost nearly half of those gains by 11:00 GMT (12:00 BST).

However, traders also cited uncertainty among investors over whether cocoa would be able to hold near current prices, which remain high by historical standards, after a rally last month petered out.

"Everyone is a bit wary that prices have struggled quite a lot over the past few weeks," Stephanie Garner at Sucden Financial in London told Agrimoney.com.

'Tight sell stops'

Uncertainty was being fuelled by a dearth of physical trading, in the gap between the main crop in Ivory Coast, the world's biggest cocoa producer, and the smaller mid crop.

"That exaggerates the importance of fund activity and makes investing in the market a much more technical game," Ms Garner said, adding that investors who were buying were taking a cautious stance.

"They are keeping tight sell stops in."

New York cocoa for May stood 1.0% higher at $2,905 a tonne, with London's May lot up 0.6% at £2,137 a tonne.