Sept. 26 (Bloomberg) -- The Brazilian real may gain after central bank President Henrique Meirelles said he has no plans to stem the currency's 16 month-month rally against the U.S. dollar.

Meirelles said in an interview in Washington yesterday that ``the central bank doesn't plan to direct or influence'' the exchange rate even after the real surged 42 percent against the dollar since May 2004, crimping exporters' profits. The comments dash expectations among some investors that the bank might sell reais for dollars this week following the Brazilian currency's 1.5 percent climb last week, said Mario Battistel, a trader at Sao Paulo-based currency brokerage Novacao Corretora.

``He may well be signaling that they won't intervene and in that case the dollar will likely fall more,'' said Battistel, head of foreign exchange at Novacao Corretora.

Brazil's real rose 0.5 percent against the dollar on Sept. 23, a third day of gains. It has climbed 17 percent this year, the best performance among 60 currencies tracked by Bloomberg.

``The central bank doesn't plan to direct or influence the trend in the exchange rate,'' Meirelles said in the interview. ``We're not here to decide which exchange rate is good or bad for the country.''

Rising Exports

The real is surging because Brazil is reducing its public debt, fighting inflation and increasing exports, Meirelles said. Brazil doubled exports in the last three years to about $110 billion as demand surged for its soybeans, iron ore and airplanes.

Volkswagen AG, Europe's biggest carmaker, said Aug. 17 a stronger Brazilian currency may prompt its exports from Brazil to fall 4.2 percent in 2006. Meirelles said a strong currency helps fight inflation. He said he isn't worried that it may slow economic growth.

``I think the real will keep going, perhaps to 2.25 to 2.20 reais to the dollar, and will keep going higher as long as the interest rate differential is so great and the trade balance is positive and that doesn't look like it's going to change anytime soon,'' said Tony Volpon, an economist and market analyst at CM Capital in Sao Paulo.

Brazilian central bank policy makers reduced the benchmark overnight rate earlier this month for the first time in 17 months after nine increases stemmed a surge in inflation. They cut the rate to 19.5 percent from a two-year high of 19.75 percent.

Consumer prices in Brazil, South America's largest economy, are rising at an annual pace of 6 percent, the lowest in 15 months, after the central bank's interest-rate increases slowed consumer demand. The IMF forecasts that economic growth will slow to 3.3 percent this year after a 4.9 expansion in 2004.

To contact the reporter on this story: Adriana Arai in Washington at aarai1@bloomberg.net

Last Updated: September 25, 2005 23:19 EDT