April 1 (Bloomberg) -- Brazil's real rose to a three-week high on investor expectations that a surge in exports will boost the flow of dollars into South America's largest economy.

Brazil posted a record $24.8 billion trade surplus in 2003 year, reflecting a 21 percent surge in exports, and has a $6.17 billion surplus in 2004 to date, a 62 percent increase over the same period a year ago, the Trade Ministry said today. The country exported $7.9 billion in goods in March, the highest since the government began keeping monthly records in 1954.

Domestic demand remains week ``so companies have an excess of products they're selling abroad, helping the trade surplus,'' said Mario Battistel, head currency trader at Novacao Corretora de Cambio in Sao Paulo. ``Exports really are quite high.''

The real rose 0.2 percent to 2.8905 per dollar at 11:19 a.m. New York time, boosting its five-day gain to 1.9 percent, the eighth-best performance against the dollar among the 16 most- traded currencies. The real last traded at a stronger level on March 10, when it reached 2.8790.

The U.S. dollar contract for May 4 settlement, the most traded on Sao Paulo's BM&F commodities and futures exchange, fell 0.23 percent to 2.9200 reais to the dollar.

The one-day bank deposits futures contract for January delivery, the most-traded interest rate contract on the BM&F commodities and futures exchange, was little changed at 15.170 percent from 15.174 percent yesterday.

Soaring Trade

Export volumes rose by a sixth last year compared with 2002, led by manufactured goods, even as some exporters voiced concern the currency's 22 percent gain against the dollar might make Brazil's goods less competitive overseas.

The central bank last week boosted its 2004 trade surplus forecast to $24 billion from $20 billion, saying export growth will outpace import growth.

``There was a belief that the real below 3 per dollar could hurt exports, but that's not what has been happening,'' said Marcelo Avila, chief economist at GlobalStation Financial Markets in Sao Paulo. ``Exports are still growing faster than imports.''

Brazil is the world's No. 1 producer and exporter of orange juice, the No. 2 producer of soybeans and iron ore and among the world's top 10 producers of crude steel.

Bond Sales

Adding to investor optimism for capital flows to Brazil, commodity prices on international markets are responding to accelerating growth and demand in China, Japan and the U.S. and local companies are again selling bonds abroad.

Banco Bradesco SA, the country's largest non-government bank, sold 200 million euros ($246.6 million) of 10-year bonds, said Luis Berlfein, head of debt capital markets at the Brazilian unit of BNP Paribas SA, which managed the sale.

Braskem SA, Latin America's largest petrochemical company, plans to raise $125 million from a group of banks, led by UBS AG and Credit Suisse, O Globo newswire reported.

On Monday, Banco do Brasil SA, Brazil's No. 1 bank, said it plans to sell $500 million to $1 billion in five- to 10-year bonds abroad this year.

``We're beginning to hear again about the bond sale announcements, effectively increasing the flow of dollars to Brazil that is helping to weaken the dollar,'' Battistel said.

Brazil's benchmark bond maturing in 2040 rose 0.65 cent on the dollar to 107.25, paring its yield to 9.92 percent, according to J.P. Morgan Chase & Co.

To contact the reporters on this story: Elzio Barreto in Sao Paulo at ebarreto@bloomberg.net. Daniel de Castro in New York at ddecastro@bloomberg.net

Last Updated: April 1, 2004 11:22 EST