Big miners jump as iron ore price lifts

BHP and Rio Tinto soared in London trade as iron ore posted gains on the back of a slightly weaker US dollar.

Machinery operates in a pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Photographer: Ian Waldie/Bloomberg)

The iron ore price has risen as the US dollar weakened slightly after the Federal Reserve decided to keep interest rates on hold.

Iron ore added 1.6 per cent to $US56.30 overnight, according to The Steel Index, from $US55.40 the following day. Dalian iron ore futures also traded higher.

In London trade, BHP Billiton soared 4.1 per cent, while Rio Tinto jumped 3.3 per cent, and the upbeat leads could offer direction to the Australian share market this morning.

The US central bank’s decision not to lift interest rates yesterday sent the greenback slightly lower. The WSJ Dollar Index has spent much of the last 24 hours trading lower, before recovering slightly to be down 0.06 per cent by 6.05am (AEST).

A weaker US dollar makes it cheaper for non-US buyers to pay for commodities that are denominated in US dollars, which can spark buying.

The iron ore price has been easing back in recent weeks from a peak of $US61.80 it reached mid-August, heading towards a more sustainable level as supply continues to outpace demand.

But the commodity has held at surprisingly strong levels in recent months, which has caused some analysts to upgrade their forecasts for this year.

Analysts at Morgans are the latest to increase their predictions. Morgans is now forecasting an iron ore price of $US47.50 for calendar 2016, up from an earlier estimate of $US43.80.

Despite the upgrade, these predictions are the latest in a chorus of calls for the commodity to decline further. Morgans kept its estimates steady for 2017, at $US47.50 and 2018 at $US52.50.