* Euro hits 3-week high $1.4423
* WSJ story on German concession on bailout boosts sentiment
* Euro rally on shaky ground; resistance $1.4454/1.4568
(Adds quote, detail)
By Neal Armstrong and Naomi Tajitsu
LONDON, May 31 (Reuters) - The euro hit a three-week high against the dollar on Tuesday after a report said Germany could make concessions on efforts to put together a bailout for Greece, helping to ease fears over a Greek debt restructuring.
The single currency rose to $1.4425 according to electronic trading platform EBS, but further gains were capped by offers seen above that level, while technical resistance loomed around $1.4450.
Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece, the Wall Street Journal reported, citing people familiar with the matter. [ID:nL3E7GU21K]
The report comes as Europe has stepped up efforts to draft another bailout package for Greece, and Eurogroup leader Jean-Claude Juncker on Monday expressed optimism that a new package was coming together. [ID:nL3E7GV07I]
"There's quite a big risk premium in the euro based on Greek default concerns, so if Germany lends more money to get them through to 2013, the chances of a disorderly restructuring further down the line become much reduced," said Adrian Schmidt, currency analyst at Lloyds Banking Group.
The report triggered demand for higher-risk, higher-yielding currencies including the Australian and New Zealand dollars, which both rose sharply against the low-yielding yen.
By 1120 GMT, the euro hovered around $1.44, below resistance at $1.4454, the 50 percent retracement of this month's fall from nearly $1.50. Above that lay the 61.8 percent retracement of the same move at $1.4568.
The dollar fell more than 0.5 percent against a currency basket to 74.439 <.DXY> <=USD>, as the euro's rally and better sentiment towards riskier assets pushed it to a three-week low.
The dollar was flat against the Swiss franc at 0.8520 francs
The New Zealand dollar jumped 1 percent to $0.8264
Despite the dollar's broad losses, it rose roughly 1 percent on the day to around 81.78 yen
EURO UPSIDE CAPPED
Some analysts were sceptical about the sustainability of the euro's rise as they believe a Greek debt restructuring is inevitable, and that more aid loans would only throw new debt onto old debt without solving Athen's fiscal problems.
"I would fade this rally in the euro for now. Investors will be looking for a more lasting resolution to the Greek debt problems and our economists haven't ruled out the possibility of a voluntary restructuring involving private bondholders," said Valentin Marinov, currency strategist at Citi.
Renewed concerns about Greece's debts have pushed the euro around 2.5 percent lower versus the dollar so far this month, cutting overstretched long euro positions.
While euro positioning remains long, it is more balanced than a month ago, and UBS currency analyst Geoffrey Yu said recent, choppy trade illustrated the deep division between euro bulls and bears while euro valuation remains relatively high.
"Real money is still not convinced that Greece will be able to last the next few months, so there's a struggle between people who want to buy the euro on dips and people who are trying to grab any opportunity to get out of the euro," he said.
But given the market's obsession with monetary policy and rate differentials between currencies, Yu said the euro may initially rise to $1.45 if the European Central Bank next month signals that it is preparing to raise interest rates again.
Data on Tuesday showed euro zone inflation rose more slowly than expected in May but remained well above the European Central Bank's 2 percent target. [ID:nBRLVGE7ET]
An ECB rate rise would widen the euro's rate advantage against the dollar, particularly given that the Federal Reserve is widely expected to keep its lending rate near zero for months to come.
Signs of weakness in the U.S. economy have raised speculation that U.S. rates will stay low. Investors will look to U.S. data on home prices, regional manufacturing and consumer confidence later on Tuesday to better gauge the economy's health. (Editing by Susan Fenton)