Romania’s leu surpassed all European currencies to become the world’s best performer this year and is poised for more gains because foreign investment may double as the former communist dictatorship enters the European Union.
The leu rose 20% against the dollar in 2006, passing a six-year high, fueled by investments from foreign companies including Erste Bank AG, Austria’s No. 2 bank.
Erste bought 62% of Romania’s biggest financial company, expecting that joining the world’s largest trading bloc on Jan. 1 will boost growth and living standards.
Companies want to take advantage of the cheap pool of skilled labor on offer. The leu may gain about 4% to 2.48 per dollar by the end of 2007, said Beat Siegenthaler, a senior currency and fixed-income strategist at TD Securities in London.
The country expects a record €8 billion ($10.7 billion) in foreign capital inflows this year, from €5.2 billion in 2005, the government estimates.
Next year the government projects investment will rise by €10 billion.