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A German newspaper said on Wednesday Berlin was considering a Greek sovereign debt rescheduling plan that would allow Athens to buy back its own debt using a euro zone crisis fund.
Greece's deputy finance minister said no talks on debt restructuring were ongoing. It had denied on Tuesday that it would seek to extend the repayment period of its debt after the deputy prime minister spoke in support of a such a plan.
Die Zeit weekly, citing unnamed government sources, said in a preview of Thursday's edition that the plan was to let Greece use credits from the European Financial Stability Facility (EFSF), in return for a commitment to pro-stability policies.
The newspaper used the word 'Umschuldung', which could refer to either a restructuring or a rescheduling. It gave no more details about the plan or conditions of any such buyback.
It did however add that, again according to unnamed sources, Germany was "no longer fundamentally opposed to increasing the lending capacity of the EFSF" as part of a broader package of measures to stabilise the euro.
This is largely in line with what Finance Minister Wolfgang Schaeuble has said regarding the need for a "complete package" that would address the limits to the real capacity of the euro rescue package because of its complex guarantee system.
The dollar slid to a two-month low against a basket of currencies on Wednesday, as continued short-covering in the euro helped spur a broad fall in the dollar.
The euro remained supported after having risen on Tuesday, when it attracted demand from Middle East accounts and gained a lift from an upbeat German ZEW investor sentiment report.
"People are covering euro short positions as Asian sovereign names have been buying the euro on dips in the past few days," said a trader for a Japanese bank in Tokyo.
A near-term focus is whether the euro will manage to clearly break resistance at around $1.3500. That area is important since it marks the euro's mid-December peak, and also because the top of the weekly Ichimoku chart, a technical indicator of support and resistance levels, lies at $1.3510. In addition, there is talk of option barriers near $1.3500. If $1.3500 is breached, the euro's next upside target lies at $1.3571 (50% retracement of the euro's November to January slide).
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