Following a record high against the yen and a surge against the US dollar, the euro's performance could be setting the stage for a battle in the currency market, according to one expert.

Indications that the European Central Bank could raise interest rates in June pushed the European currency to a level of $1.3524 on the EBS trading platform, Reuters reported.

The Telegraph reported that the currency markets of the world are now realigning "as Europe takes over as the engine of world growth".

Speaking to Reuters, Shinkin Central Bank currency trader Hiroshi Yoshida said: "The euro is just very strong at the moment."

Meanwhile, the carry trade is "driving everything" according to Bank of New York currency chief Simon Derrick.

"What worries me is that this could lead to currency wars," Mr Derrick told the Telegraph, noting that surges in China's reserves could be "the catalyst for conflict" if it is not handled properly.

Mr Yoshida predicted that the currency market may not fluctuate much ahead of the G7 meeting, but that "we're likely to see more euro strength, as well as yen selling, afterwards", Reuters reported.