The franc dropped sharply on Thursday after foreign reserves data released by the SNB showed the central bank has so far succeeded in defending the 1.20 cap it imposed on Sept. 6 without its balance sheet ballooning.

"Latest foreign exchange reserve figures confirmed that the SNB has spent fairly little across September to floor the franc against the euro," Credit Suisse analyst Koon How Heng.

"We expect that the SNB will weaken the franc further towards 1.2500 once the opportunity arises."

The franc fell 0.1 percent against the euro to trade at 1.2418 francs by 0605 GMT compared to the New York close.

Urs Mueller, head of the BAK Basel Economics research institute, said the SNB could shift its cap on the franc.

"The SNB could easily go somewhat above the current lower limit of 1.20 francs," he told the Tages-Anzeiger on Saturday.

"However, one must be aware that the SNB cannot defend a level above 1.30 in the long-term as the equilibrium rate lies in this region -- somewhere between 1.30 and 1.40."

The franc rose 0.6 percent against the dollar, which was down across the board on rebounding risk appetite following

a promise by the German and French leaders to announce fresh measures to solve the euro zone's debt crisis by the month-end.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks in Berlin on Sunday that their goal was to come up with a sustainable answer for Greece's debt problems and agree how to recapitalise European banks. But they declined to reveal any details of their plan.