The European Central Bank said today it would continue with its government bond purchase programme, and voted to keep interest rates on hold.
President Jean-Claude Trichet declined to comment on bond market pressure for the programme to be greatly increased.
"The Securities Market Programme (SMP) is ongoing, I repeat - ongoing," Mr Trichet told a news conference after the ECB's monthly policy meeting, but added: "I won't comment on the observations of market participants."
Hopes that the ECB would rush through new anti-crisis measures, such as expanding its government bond buying, had helped the euro find its feet and lifted stock markets.
The ECB started purchasing bonds through its Securities Market Programme (SMP) in May and has so far spent €67 billion, most of it during the first three weeks of the programme.
It has not said what it has bought or how much it intends to spend although traders say it increased Portuguese bond buys this week.
Asked on whether the bond programme is temporary, Mr Trichet said the ECB's actions had to be "commensurate" to what happened on monetary policy transmission channels.
The scheme has been a source of division within the ECB. Bundesbank heavyweight Axel Weber has repeatedly criticised the tactic and in October called for the programme to be scrapped, saying it had not worked.
German economy minister Rainer Bruederle said today liquidity would not solve the crisis and that pumping too much money into the economy risked creating new bubbles.
The ECB's decision to keep its main refinancing rate on hold at 1.0 per cent was widely expected.
"The ECB doesn't have the power to solve the current problems but it does have to power to make them worse," said BNP Paribas economist Ken Wattret. "Removing any of support at this stage is likely to aggravate the situation."
Markets are already discounting an eventual rescue of Portugal. While that would be manageable, assistance for its neighbour Spain would sorely test EU resources and raise deeper questions about the integrity of the 12-year-old currency area.
Reuters