IT is ''in the lap of the gods'' whether Britain will achieve the right exchange rate to be able to enter the euro, the Bank of England warned yesterday.

The Bank's director for Europe, John Townend, cautioned any attempt to lower the value of the pound "artificially" to ease the way for UK membership could re-ignite inflation, leading to higher interest rates.

In a speech in the Malaysian capital Kuala Lumpur, he said that the Government's five economic tests must be met if Britain was to sign up to the single currency.

He said the economics of joining economic and monetary union (EMU) were ''not straightforward'' and that while there were considerable potential benefits, there were also ''equally considerable risks''.

His comments are likely to be welcomed by the Treasury which has insisted that Chancellor Gordon Brown's five economic tests are paramount in deciding whether the Government should recommend membership in a referendum.

That position has come under pressure from pro-euro ministers such as Leader of the Commons Robin Cook and Labour Party chairman Charles Clarke, who have argued the Government must also take into account the political implications.

In his speech, Mr Townend said that ''virtually everyone'' agreed the value of the pound had to fall against the euro if Britain was to join, but it was unclear how this could be achieved.

The best way, he said, would be if the euro strengthened generally on the foreign exchanges while the pound retained its value against other major currencies such as the US 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.

Any attempt to ''artificially'' drive down sterling to a level at which the UK could join was fraught with danger for the British economy, risking higher inflation which could force the Bank to put up interest rates.