The currency has gained 4.7 percent since Finance Minister Antonio Palocci on March 28 raised his 2005 export forecast to $112 billion, 17 percent above last year's record. Traders such as Decio Guimaraes at Concordia SA said trade inflows and the central bank's halt to dollar purchases and currency swaps has the real headed for its strongest closing level since February.

Trade numbers are surprisingly robust, the economy is growing, and they canceled the swap auction,'' said Guimaraes, head of the Treasury desk at the brokerage arm of Sadia Group, Brazil's largest meat exporter, in an interview. Everything, fundamental and technical, points to a stronger real today.''

The real rose 1.1 percent to 2.6030 per dollar at 4:57 p.m. New York time from 2.6297 late yesterday, the best performance against the dollar of the 16 major currencies. In the past five days, it has gained 3 percent.

At 4 p.m. in Sao Paulo (3 p.m. New York time), when most trading in Brazil ends, it traded at 2.5995 per dollar from 2.6253 at the same time yesterday.

Brazil's $558 billion economy grew 5.2 percent in 2004 as the world's biggest producer of sugar, iron ore and coffee boosted trade with expanding economies such as China, pushing exports to a record $96.5 billion, a 32 percent increase over 2003's $24.8 billion surplus.

Palocci last week raised his forecast for exports this year almost 4 percent from a previous forecast of $108 billion even after the real's 11 percent rally in 12 months. The government on April 1 said that exports jumped 19 percent in March to $9.25 billion, the second-highest monthly level ever.

Industrial output in March expanded 4.4 percent in February, the government said today, the slowest pace in five months after the central bank raised interest rates at seven straight monthly meetings from a three-year low of 16 percent.

After the bank on March 16 raised its target overnight rate to a 17-month high of 19.25 percent, currency traders such as Rodrigo Boulos of Banco Standard de Investimento said additional rate increases might crimp growth and deter investment.

More than half of the government's $450 billion debt, the largest amount among developing nations, is tied to domestic interest rates.

Traders today drove down yields on interest-rate futures as a bet slower industrial output makes it less likely the bank will raise its benchmark rate for an eighth month on April 20.

Dollar Purchases, Swaps

The real will probably keep gaining as the central bank stays out of the market for buying dollars, a practice it stopped three weeks ago, said Guimaraes.

The bank bought $12.87 billion of dollars between Dec. 6 and March 16 -- when the bank last sold reais for dollars -- the bank's chief economist, Afonso Bevilaqua, said March 29.

Guimaraes also said that the bank's decision not to sell contracts used by investors to protect against currency declines, interest-rate swaps known locally as ``swap de cupom cambial,'' had added to the currency's appreciation.

The bank from Feb. 2 through March 9 sold $8.73 billion of the swaps that pay investors if the real strengthens, offering investors the opportunity to benefit from the yield advantage offered by Brazilian investments without adding to inflows.

The bank yesterday canceled its weekly swap auction for a fourth straight week.

The yield on interest rate futures fell for the first day in five, with the contract on one-day bank deposits for January delivery, the most-traded on the BM&F, falling to 19.420 percent from 19.566 percent yesterday. The contract indicates investor expectations for year-end.

Brazil's benchmark bond maturing in 2040 rose for a second day, adding 1.75 cent on the dollar to 113.10, paring its yield to 9.69 percent, according to JPMorgan Chase & Co.

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