Brazil's leading opposition party has accused the central bank of causing the currency collapse.

The currency, known as the real, has fallen to new lows as the financial markets panic over the possibility of leftist Worker's Party (PT) candidate Lula da Silva winning national elections in October.

On Wednesday, the real tumbled 5% to close at another record low of 3.47 to the US dollar.

PT's chief economic strategist Guido Mantega, speaking in London after meeting with key foreign investors, accused the central bank governor Arminio Fraga and President Fernando Henrique Cordoso of a "terrorist" election strategy.

"They insinuated that if the opposition won the elections in Brazil, we would go toward a similar situation as Argentina," Mr Mantega said.

Planting the seeds

But Mr Mantega added that they have since changed tack.

Mantega has advised Lula since 1989

"The government has changed the strategy but they have planted the seeds, the panic, and we know that it is very easy to cause this fear but very difficult to overcome it."

Mr Mantega said US Treasury Secretary Paul O'Neill had "added to the fire" by suggesting at the weekend that financial aid to Brazil, Argentina and Uruguay might disappear into Swiss bank accounts.

Mr Lula has held a significant lead in opinion polls to win the elections since the start of the year.

The real has lost more than 33% of its value this year.

"It's the same story as yesterday," said Flavio Byron, a currency trader at Liquidez brokerage in Rio de Janeiro, on Wednesday.

"Dollars are in short supply, companies need them, and the economic outlook is still negative."

Policy problem

Mr Mantega said if his party won the elections it would do everything possible to avoid taking out further IMF loans because of their "high cost" and warned economic conditions could get worse before they improved.

"It's a four-year programme and we will not respond to short-term conditions," he said of the PT's economic plans.

"The transition period might be hard but we aim to reduce interest rates which is a basic need of the Brazilian economy."

Mr Mantega has criticised the central bank in the past for creating the conditions which have cause the crisis by setting inflation targets that were too low, preventing it from cutting interest rates.

IMF meeting

Brazilian economic officials are currently meeting with the IMF to try and agree a financial package to stem the real's slide.

"The expectation is that the Brazilian delegation will be here at least until the end of this week and maybe longer than that," IMF spokesman Francisco Baker said.

The Brazilian central bank chairman Arminio Fraga has said he hopes to have reached a new deal by 12 August.

Brazil still has $1bn available from a $15.2bn aid deal organised by the IMF which ends in December.