* Euro falls after Moody's says it may cut Spain's rating
* Euro debt worries lift Swiss franc to record vs euro
* Dollar gains ground as Treasury yields rise
* Empire State manufacturing index rises (Recasts, updates prices, adds U.S. data, changes byline, dateline, previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 15 (Reuters) - The euro fell broadly, hitting a record low versus the Swiss franc on Wednesday, after Moody's said it may downgrade Spain's debt rating, but losses may be contained as liquidity thins going into the holiday season.
The dollar, on the other hand, rose, bolstered by U.S. data showing a steady recovery in the New York state's manufacturing sector. A somewhat soft U.S. consumer price index, while supportive of the Federal Reserve's quantitative easing, did not alter the view that the economy is growing modestly.
Investors on Wednesday, however, focused more on contagion risks from the euro zone debt crisis. The Moody's news, saying the ratings agency placed Spain's Aa1 ratings on review for a possible downgrade, was a reminder that fiscal problems in Europe are far from over.
The Moody's report pushed Spanish bond yields higher.
Still, some analysts suggested investors are less likely to sell the euro further given that the market has pretty much priced in most of the bad news on the euro zone. Analysts said the Moody's news, while clearly negative for the euro, didn't add anything new to the debate on the region's crisis.
"The ratings news had an impact on the euro but there has been no follow-through," said Matthew Strauss, senior currency strategist, at RBC Capital in Toronto.
"We're starting to see lower liquidity toward the holiday season and the market right now is unwilling to take the euro lower. The momentum is not favoring euro losses because of a lack of conviction."
In early New York trading, the euro was down 0.4 percent against the dollar at $1.3330, off an earlier low of $1.3285 where traders reported sovereign demand for the euro.
The euro edged 0.2 percent lower against the Swiss franc to 1.2807 francs, having hit a record low of 1.2758 on trading platform EBS in the wake of the Moody's news on Spain.
The Swiss currency gained as worries about debt problems in some European countries encouraged investors to reduce exposure to riskier euro zone assets and seek safer alternatives.
Contributing to the euro's fall, the dollar firmed after mostly upbeat economic data lifted U.S. bond yields, enhancing the appeal of some dollar-denominated assets.
"On balance, the data doesn't really change expectations that the economy is improving gradually and because it hasn't really surprised in either direction, it essentially allows the market to revert back to what it's most comfortable with," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
"Right now, that's selling the euro on increasing sovereign credit concerns."
The dollar gained 0.4 percent against a basket of major currencies to 79.693, moving away from a three-week low of 78.819 plumbed on Tuesday.
The 10-year U.S. Treasury yield hit a seven-month high just above 3.50 percent in Asian trade, helped by above-forecast U.S. retail sales data.tax cuts would worsen U.S. fiscal problems even if they help the economy. Traders said that for some investors this made the Swiss franc a more attractive safe-haven asset than the dollar.
(Additional reporting by Jessica Mortimer in London and Wanfeng Zhou in New York) (Editing by Theodore d'Afflisio)