June 25 (Bloomberg) -- Zimbabwe's dollar plunged 80 percent on the country's illegal currency markets as residents rushed to buy foreign exchange amid increasing political violence ahead of the presidential runoff election.

The currency changed hands at 100 billion to one U.S. dollar in Harare today, compared with 20 billion a week ago, said Misheck Chinengudu, who trades foreign exchange illegally on the streets of the capital. On the official inter-bank market, the dollar is at 91.8 billion, according to Bloomberg data.

``People are terrified that Zimbabwe is going to collapse completely,'' said Julius Machipanda, who also trades in the city. ``Others are scared because the violence is terrible and they want to run away, others have had their homes burnt down or their relatives have been abducted. They just want to get out right now, no delays.''

Political violence has increased in Zimbabwe ahead of the June 27 poll in which President Robert Mugabe will seek to extend his 28-year rule of the southern African nation. Morgan Tsvangirai, who garnered more votes than Mugabe in the first round on March 29, has withdrawn from the ballot after 86 of his supporters were killed in what he said was a state-backed campaign.

Zimbabwe is in its 10th year of economic recession, blamed largely on Mugabe's failed land-reform program and economic mismanagement. Inflation is at least 355,000 percent.

``Many people tell us they need foreign currency to flee the country,'' said Chinengudu in an interview from Harare. ``This election is rigged and the people are doomed and getting ready to run to South Africa, Britain, anywhere but here.''

`Cash for Cash'

Zimbabwe's currency market operates on two levels. Businesses and wealthy individuals often use the ``Rapid Transfer Gross Settlement,'' where money changes hands electronically. Other black market transactions are known as ``cash for cash'' where the money is physically exchanged.

Jemima Sithole, a seamstress who lives in central Harare's old Cows' Guts district, said she needed foreign currency to escape ``the regime.''

``I have relatives in the U.K. and in South Africa,'' she said. ``I can go to them, but I cannot arrive empty-handed because they are also struggling and in both cases they are illegal immigrants hiding. I have to escape the regime, no one can live like this.''

As many as 3 million Zimbabweans, about a quarter of the population, have fled poverty and political violence since 2000. Many flee to neighboring South Africa and Botswana, though an informal network of self-exiled Zimbabweans that exists throughout Europe, North America and Australasia.

To contact the reporter on this story: Brian Latham in Durban via Johannesburg at pmrichardson@bloomberg.net.

Last Updated: June 25, 2008 09:29 EDT