Newspapers Marca and AS said Carrasco, who scored for Atletico in the 2016 Champions League final against Real Madrid, has been drafted in by Diego Simeone's side after their bid to land Edinson Cavani from Paris St Germain fell through.
Carrasco, 26, moved to Chinese Super League club Dalian Yifang in February 2018 and has not played a competitive game since the championship finished on Dec. 1 of last year. Atletico sit outside the top four in La Liga after their worst spell in eight years under Simeone. They visit city rivals and league leaders Real Madrid on Saturday.
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