However, he feared the UK was unlikely to be among the first group of countries to set up a currency union.
'I continue to believe that real benefits do remain to be derived from a single currency for the European Union,' Lord Howe told a conference of businessmen.
'And I continue to regard it as unlikely that a group of countries who are able to reap those benefits will forever reject the opportunity. Just occasionally, governments do manage to take economically rational decisions.'
He warned: 'It is a characteristically British illusion in foreign policy to suppose that because something offends our sensibilities - even if not our interests - it isn't going to happen. That isn't a very wise illusion to cherish.'
He added: 'I believe - and I choose my words carefully - that there is at least an even chance that a limited number of countries on the continent of Europe will decide, at or near the turn of the century, to construct between themselves a currency union.
'At the same time, sadly, I find it difficult to believe that Britain will be in the first wave of such an arrangement. But I cannot think that Britain will choose indefinitely to be excluded from such a European currency bloc.'
Lord Howe acknowledged that in other European countries the political debate about the merits of economic and monetary union continued, and the rigid timetable set out in the Maastricht Treaty had been blown off course.
'But, to put it very gently again, I believe it is highly premature to conclude that EMU is off the European agenda. The fact that something will not happen automatically does not meant that automatically it will not happen.'