Any attempt to "artificially" lower sterling's exchange rate against the euro would pose dangers for the UK's economic stability, warned a senior Bank of England official on Tuesday.

Speaking in Kuala Lumpur, the bank's director for Europe, John Townend predicted that the closer exchange rate, regarded as essential for UK entry to the single currency, was "in the lap of the gods" and subject to the vagaries of the foreign exchanges.

The best outcome would, the official said, be a rallying of the euro on the international money markets with the pound maintaining its values against the dollar. "Regrettably, however, any such benign outcome seems to be in the lap of the gods rather than policy makers in the UK or elsewhere," he said.

Warning pro-euro ministers not to dream of tampering with the invisible hand of the markets, he warned: "If the sterling exchange rate were to fall, or be artificially lowered, through a generalised depreciation in the sterling effective exchange rate, this would be bound to put strong upward pressure on UK inflation, and carry potential implications for UK monetary policy".

Sticking to the government's five economic tests, Townend insisted, would ensure the economic convergence with the euro zone necessary to overcome the "considerable risks" of economic and monetary union.

"Undoubted benefits" of membership of the European currency included "deeper and more liquid" financial markets and the end of exchange rate uncertainty for businesses trading in the euro-zone.

But a "one-size-fits-all" monetary policy set by Frankfurt's European Central Bank may not be right for all - an issue that could precipitate a crisis in the case of a external "shock" to the financial system, he cautioned.