SAO PAULO -- He attended only primary school, went to work in a machine shop at 15 and was jailed as a firebrand leftist leader by the former military regime.

But eight days before a landmark presidential election, opinion polls show Luiz Inacio Lula da Silva is within a stone's throw of sweeping to the highest political office in Brazil.

The prospect of a president born into crushing poverty in a country with a yawning gap between rich and poor is being hailed as a sign that democracy is now firmly rooted in Brazil.

"These days, Brazilian society is less prejudiced against someone like Lula," trade union leader Joao Antonio Felicio said.

Although more Brazilians than ever appear ready for Lula (as he's commonly known), both Brazilian and foreign investors are hedging their bets.

They pounded Brazil's currency, stocks and bonds this week, fearing he represents a sharp break from the market-friendly policies of current President Fernando Henrique Cardoso, who leaves office in January after eight years.

The real dropped yesterday to $3.875 against the U.S. dollar, the lowest level since it was introduced, at par with the dollar, in 1994. The Bovespa index, the key indicator on the Sao Paulo stock market, fell 5.3 per cent to its lowest level since 1999.

The markets are roiling despite a strengthening trade surplus and a $30-billion (U.S.) loan agreement reached with the International Monetary Fund in August.

Investors appear unconvinced by the fact that Mr. da Silva, a former trade union leader who at 56 is making his fourth presidential bid, long ago jettisoned proposals such as nationalizing Brazil's banks.

Or that he meets regularly with business representatives and is most often seen on television wearing a suit and tie.

"It's natural to have a lack of confidence in a person like Lula," political analyst Paulo Calmon said. "In the past he was opposed to the IMF, to international agreements, to bankers . . . It's extreme, but it's fully justifiable."

Voters, who will choose a president, state governors and legislators on Oct. 6, are so far unmoved by the market turmoil.

Mr. da Silva, whose campaign alliance includes two tiny Communist groups and a centre-right party, has stayed above 35 per cent in opinion polls for more than a month.

Much of the election talk now centres on whether Mr. da Silva will win more than half of valid votes cast, making an Oct. 27 runoff vote unnecessary.

He saw his chances further strengthened yesterday when a faction of a crucial political party in Rio de Janeiro state threw its weight behind him, abandoning the government's candidate.

"If I already believed in my victory, I am now almost certain that I will win," Mr. da Silva told a news conference.

The latest published survey backs his bravado, giving him 41 per cent against 19 per cent for his nearest rival, Jose Serra, Planning Minister in Mr. Cardoso's cabinet.