By Peter Greste BBC South America Correspondent in Sao Paulo

Brazil's financial markets have recovered strongly in the last days ahead of Sunday's decisive second round of the presidential election.

The markets had punished the country's strong support for the left-wing candidate, former trade union leader Luiz Inacio Lula da Silva, by battering Brazil's currency and driving the stock market down.

But in the past week the market has responded positively to Lula's moves to address investors' concerns.

The currency climbed almost 3% on Thursday alone, while the Brazilian stock index has recovered a huge 17.5% over the past five days.

Changing views

If there is one thing that terrifies the world's financial markets, it is a radical left-wing politician who declares he will default on the nation's debt repayments.

Lula first ran for Brazil's presidency in 1989

That is exactly what Luiz Inacio Lula da Silva did when he first ran for Brazil's presidency in 1989, and the markets have a long memory.

In this campaign, the candidate widely known here simply as Lula has done his best to convince both voters and the business and financial world that he has genuinely moderated his views and shifted towards the centre.

Calming nerves

At the start of the campaign, few traders believed it.

Every time Lula rose in the polls, the markets punished the country by chopping down the value of the currency and fleeing Brazilian stock markets.

By the time Lula claimed 46% support in the first round of voting, the currency had lost a massive 40% against the US dollar.

To calm nerves, Lula promised he would announce his economic team quickly after an election victory, and the people tipped for the jobs seem to be market friendly.

Lula's Workers Party has also launched a joint initiative with business leaders to revitalise Sao Paulo's stock market.

The markets welcomed the move.

Stock analysts say that is a clear sign of a growing belief that perhaps the once growling trade union bulldog has indeed changed.