NEW YORK, June 16 (Reuters) - The euro was little changed against the dollar on Wednesday, as a recovery in U.S. stocks lifted risk appetite and offset fresh concerns about Spain's credit and banking system.

A plunge in U.S. housing starts in May to their lowest level in five months also weighed on sentiment earlier, though it was mitigated by stronger-than-expected industrial production data. See

The euro's rebound this week lost steam after the premium investors demand to hold 10-year Spanish government bonds over German bunds hit a euro lifetime high after a report that the European Union, the International Monetary Fund and the U.S. Treasury were drawing up a liquidity plan for Spain. The European Commission denied the report by Spanish newspaper El Economista.

We had such a great rally yesterday so a pullback was somewhat expected, said Fabian Eliasson, vice president of FX sales at Mizuho Corporate Bank in New York.

The worsening situation Spain sort of rattled the market, he added. We also had a fairly poor housing start number and that further (boosted) risk aversion.

In midday New York trading, the euro EUR= was slightly lower on the day at $1.2322, after rising as high as $1.2354 on electronic trading platform EBS, the strongest level in two weeks.

Spain's central bank will publish stress tests on its lenders and Germany is coordinating disclosure at the EU level, they said on Wednesday, moving Europe's banking sector closer to putting its financial health on public display.

The banks in Spain are facing a liquidity freeze with other banks reluctant to lend to Spanish banks, said Fergal Smith, managing market strategist, Canada at Action Economics in Toronto. That's helped cap the recent rally in the euro and in riskier assets.

Against the yen, the euro was also slightly lower at 112.63 yen EURJPY=R.

SELL ON BOUNCE

Some analysts said the recent recovery in the euro looked short-term but could have further to go.

We look for the correction higher to extend to $1.2445/1.2570 -- the 2009 low and the 38.2 percent retracement of the move down from April, analysts at Commerzbank said.

Traders cited demand in the $1.2270 area from Middle East accounts, with option-related bids then seen at $1.2250.

One-month EUR/USD 25-delta put options were up slightly, suggesting the trend for the euro remains lower, though the negative sentiment is somewhat easing.

Mizuho's Eliasson said he still expects the euro to fall back below $1.20, especially as trading volume declines going into the summer months. Europe's debt woes will continue to take a toll on the single currency, he said.

I don't think the worst is over. I still think you're going to see further downgrades. The recovery there is going to be very slow, he said. If anything, I would sell it on rallies.

Against the yen, the dollar was little changed at 91.39 yen JPY=, hitting a session low after the weaker-than-expected U.S. housing data.

Lousy permits, lousy starts. It's just not looking very good and I'm not surprised to see that markets are reacting negatively to the data, said Kurt Karl, chief U.S. economist, Swiss Re, New York.

The dollar fell to its lowest in a month against the Swiss franc at 1.1260 francs CHF=. The franc also strengthened versus the euro EURCHF=R, ahead of Thursday's Swiss National Bank policy meeting.

Traders said option volatility was high, indicating market nerves around the SNB meeting, especially given the currency has shifted in low volumes in recent weeks. The options market was showing less of a bias for a strengthening franc, they said. (Additional reporting by Vivianne Rodrigues and Neal Armstrong in London; Editing by Leslie Adler)

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