The S&P/ASX 200 Index (ASX: XJO) is having a rather cracking Wednesday so far this session. At the time of writing, the ASX 200 has lifted by 0.97% to just over 7,200 points. But the BHP Group Ltd (ASX: BHP) is faring even better.
BHP shares are on fire today. The ASX's largest company is up a pleasing 2.18% to $48.84 a share at present. This leaves the mining giant at a 7.74% year-to-date gain in 2023 thus far. Not bad at all considering we are only 11 days into the new year.
Not only that, BHP shares hit a new high of $49.93 this afternoon. Not only is that a new 52-week high for the BHP share price, but it is also a new, all-time, record high for the Big Australian. That's a pretty big deal, considering BHP has been around for more than 170 years.
So what has lifted ASX investors' sentiments on BHP shares so dramatically this Wednesday?
Well, in all likelihood, it appears that a sharp increase in BHP's primary commodity – iron ore – is mostly responsible for these gains.
Iron ore up, dollar down: Why BHP shares just hit a new record high
As my Fool colleague James reported this morning, iron ore has just rocketed a healthy 3.1% higher to US$121.95 per tonne, amid "hopes that China's reopening will lead to an increase in demand for the base metal".
BHP is one of the world's lowest-cost iron ore miners. As such, any increase in the price it receives for its iron ore can boost its profitability by multiples of the underlying rise in the commodity itself. In other words, higher iron prices mean even higher profits for BHP.
Another factor that could be working in BHP's favour is the Australian dollar. As an exporter, BHP benefits when the Aussie dollar falls in value against other currencies, particularly the US dollar. And over this week so far, we have indeed seen such a fall.
On Monday, the Aussie was trading as high as 69.5 US cents. But as of today, it has slipped slightly to almost bang on 69 cents. That's another factor working in the BHP share price's favour.
So it's perhaps no wonder investors have sent the BHP share price to a new record high today after such a strong rise in its core commodity. As the ASX 200's largest share, there won't be too many Australians unhappy with this news.
