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.

In 2007, there will be two cultural capitals: Luxembourg and Sibiu in Romania. Sibiu’s old town is currently being renovated to bring it back to its former glory.
Sibiu, which is called Hermannstadt in German, was founded by Transylvanian Saxons in the late twelfth century and rapidly became a significant trade center.

Sibiu’s inhabitants hope that Transylvania and Romania as a whole will be given a boost thanks to its role as Europe’s cultural capital of 2007.

Romania’s leu surpassed all European currencies and became the world’s best performer this year, according to Bloomberg market analysts.

Prospects continue to be high because foreign investment may double after Romania joins the EU.
In 2006, following the purchase of 60% of the Romanian Commercial Bank by Austria’s Erste Bank, the leu rose 20% against the dollar, passing a six year high.

“There are several factors that increased the leu, starting with the seven-years of continuous economic growth and seven-years of continuous disinflation.

Romania expects a record 8 billion euros in foreign capital this year, a significant rise from 5.2 billion euros in 2005.
The government projects foreign investment will rise by 10 billion euros in 2007.
One of the most important foreign investors, Renault, France’s second largest carmaker, has announced it will pump in 100m euros to raise production at its assembly plant to 350,000 vehicles a year in 2008.