The euro reached a record high against the yen ahead of the expected interest rate decision by the European Central Bank (ECB), while also reaching its strongest level against the dollar for two years.

This morning, the euro was trading at 160.68 yen, Bloomberg reported, down from the all-time high of 160.87 yen yesterday.

The ECB is holding a press conference later today to discuss interest rates and analysts believe its president, Jean-Claude Trichet, will explain that the bank will need to hike interest rates.

Reuters noted that the euro has been given a boost by "steady" interest rate rises by the ECB.

Meanwhile, a weaker yen on Wednesday saw the European currency gain more ground in trading as Japanese investors continue to purchase high-yield foreign assets at the start of a new fiscal year.

It is believed that the euro's strong performance against the dollar and the yen will continue.

Nobuaki Tani, senior currency dealer at Resona Bank in Tokyo, told Bloomberg that the euro could increase to 161 yen and $1.3500.