Eddie George said the Bank had tried to talk down the pound because of the imbalance it was causing in the economy by depressing export industries. But he dismissed as "conspiracy theory territory" allegations that the Chancellor of the Exchequer, Gordon Brown, had set him an exchange rate target.
Conservative MPs on the Treasury Select Committee accused the Bank of operating monetary policy to achieve convergence with the economies that are signed up to the euro.
They said the Bank's statement earlier this month that it was ready to cut rates unless sterling fell was part of an effort to talk down the pound.
During a heated session, Mr George said: "We are in conspiracy theory territory in a great way. I am not in the business of pleasing the Chancellor."
Mr George insisted that the Bank focused exclusively on hitting the 2.5 per cent inflation target set by the Government when it handed over the power to set rates two years ago.
"I have made it crystal clear that if the Government wishes us to lower the exchange rate for the purposes of entry into the euro, it would have to change our marching orders.
"We could not accept a situation in which we were mandated by law to do one thing and then asked to do another. We would have to make it explicit that that's what we were doing, otherwise we would have to serve two masters," he said.
Asked by Tory MP David Ruffley if the Chancellor had given any indication of when the policy would change, he said: "None whatsoever. We have talked about it, but not at great length because we share the view that instructions would have to be made absolutely explicit."