The financial markets have reacted to the soaring popularity of Brazilian presidential candidate Luis Inacio Lula da Silvare by slashing the value of the country's currency.

Alarm is not needed, the World Bank says

The real on Tuesday fell to 2.712 against the US dollar, its lowest level since October, because currency traders feared that the leftist candidate could spook foreign investors.

But international lenders are loath to support their views.

"Investment into Brazil in the first quarter of this calendar year remained extremely high," said World Bank's regional representative, David de Ferranti.

"There is no sense on our part that a sense of alarm is needed."

People versus markets

"Lula", as he is nicknamed in Brazil, has the support of 40% of the people, twice that of Jose Serra who is backed by the government and by the markets.

Financial market officials fear that the investment flow will freeze

Mr Serra has said he would want to keep Arminio Fraga as president of the central bank Banco Central do Brazil if he wins.

"Markets want continuity. Serra is seen to represent a compromise of [a combination of] social spending with a continuation of Brazil's current economic policy," Banco Fator treasury director, Sergio Machado, said.

Traders' concerns circle around Brazil's 600bn reals debt which sceptics fear would soar if a president favouring a rise in government spending was elected.

Also weighing down sentiment are the stricter accounting rules introduced by Banco Central do Brazil last week.