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Iron ore gains for the second week in a row as dollar weakness overshadows supply problems

The price of iron ore futures increased for the fourth consecutive session on Friday, and was heading to a second week-long gain as a weaker dollar and more bets for an interest rate reduction in the United States overshadowed a muted recovery in demand after a military display by China, which is a major consumer.

As of 0814 GMT, the benchmark October Iron Ore traded on Singapore Exchange was 0.28% higher than its previous price at $105.1 per metric ton.

The dollar has been weakening amid speculation of a U.S. Federal Reserve interest rate cut.

The contract for the most traded January iron ore on China's Dalian Commodity Exchange closed daytime trading 0.77% higher, at 789.5 Yuan ($110.37), recording a week-to-week rise of 0.3%.

Some analysts attributed the strength of the ore prices in the afternoon to the price rally on the coal market.

Coking coal, coke and other steelmaking components have risen by 6.3% and 4,7% respectively. This is due to renewed concern over the reduction of supply.

Earlier in the morning session, both ore contracts retreated from multi-week high in the prior day as a sharper-than-expected fall in demand weighed.

The average daily hot metal production, which is a measure of iron ore consumption, fell by 4.7% compared to the previous week, reaching 2.29 million tonnes in the week ending September 4, the lowest level since February 28.

The market participants expected that the output would fall more sharply this week, due to production restrictions in Tangshan's top steelmaking hub for the military parade to be held on September 3, to commemorate World War II. However, a drop of almost 5% caught some traders and analysts off guard.

Iron ore prices are also being limited by the growing supply.

The Shanghai Futures Exchange steel benchmarks gained a lot of ground due to higher raw material costs.

Rebar, hot-rolled coil and wire rod rose 1% while stainless steel fell 0.3%.

(source: Reuters)