May 5 (Reuters) - Brazil's real could make substantial gains in the year ahead on the back of the country's big exports of commodities that have surged in value, and the draw of rising interest rates during a likely quiet spell.
Iron ore prices have soared to a record peak which is perfectly timed for Brazil where iron exports are set to jump 60% this year and displace soybeans as the country's number one source of foreign exchange earnings.
A drop in volatility across major currency markets is also ideally timed as quiet spells boost the attractiveness of currencies with yields and Brazil is expected to lift the Selic rate by 75 basis points today to 3.50%, having raised it by a similar amount in March for the first time in six years from a record low of 2%.
The real is already rising quickly but it has a long way to go to reach minimum objectives to correct its prior 2020-2021 fall and so looks cheap at a crucial time.
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