Some traders said it was euro weakness, rather than franc strength, which prompted the cap's breach.
"Effectively the euro is weak against everything today, including versus the franc. The market is not at all liquid ahead of the Easter holidays," said Giuseppe Manieri, who manages 900 million francs at fund manager Premium Currency Advisers.
"The move was seen as primarily stop-loss driven, with the market gapping lower after bids at 1.2030 got filled. We estimate 1-2 billion euros was sold at 1.20," Citi foreign exchange analyst James Thornhill said.
Traders had been reluctant to test the SNB's credibility after getting burned just after it introduced the cap, which knocked some 8 percent off the franc's value in one hit.
Prior to that, SNB intervention to rein in the currency had been less successful. The central bank ran up huge losses in 2010 trying to keep a lid on the franc, prompting calls for then chairman Philipp Hildebrand to step down.
The SNB has been using foreign exchange swaps and other measures to boost liquidity in the money market to weaken the franc. Data released on Thursday showed the SNB's foreign currency reserves rose in March to 237.5 billion Swiss francs.
Recent data shows the cap is helping to stabilize the economy, even though the currency remains some 30 percent stronger than it was before the crisis, prompting calls for more central bank action.
Swissquote analyst Peter Rosenstreich says data on Thursday showing a greater-than-expected rise in inflation had eased pressure on the SNB to do more to weaken the currency, prompting traders to test the limit.
"We think that the uptick in inflation today might have been the catalyst" for the attack on the cap, Rosenstreich said, predicting the central bank will actively defend the cap.
"Given their past statements on "unlimited funds" and credibility issues, we suspect that the days of just verbal intervention are over."
(Reporting by Caroline Copley and Martin de Sa'Pinto, Nia Williams and Jessica Mortimer in London; Editing by Ruth Pitchford)
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