By Wanfeng Zhou NEW YORK, Aug 12 (Reuters) - The Swiss franc fell sharply against the euro for a second session on Friday a day after the Swiss National Bank said it may peg the franc to halt its rally, though analysts said such a move was unlikely for now. The yen hovered near a record high versus the dollar, trading in a tight range as markets remained on alert for the possibility of intervention by Japanese officials. The Swiss currency posted its worst day against the euro and dollar on Thursday after an SNB official said the central bank could ease monetary policy further and declined to rule out the possibility of pegging the franc to the euro. "Traders do not want to stand in the way of the central bank and are running for the exits -- much to the relief of the bank," said Paul Bregg, a currency trader at Western Union Business Solutions. A peg -- essentially put a ceiling on the franc -- could open the SNB to unlimited franc selling and reserve accumulation and most analysts considered the move unlikely for now. Anchoring the franc on the euro, which is plagued by debt problems in peripheral economies, could also risk destabilizing the franc itself. "We expect the SNB to continue with its less aggressive tactics of targeting the interest rate through its target rate, the money market and even bank account interest in an attempt to create negative carry," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto. "Should this fail we would expect official intervention would come well before the announcement of a peg." The euro rose 1 percent to 1.0967 Swiss francs EURCHF=EBS, rebounding further from a record low of 1.0075 set on trading platform EBS on Tuesday. Despite the latest move, the euro is still down 12 percent so far on the year. The dollar rose 1 percent to 0.7701 franc CHF=EBS, but was 17 percent lower on the year. The dollar fell 0.1 percent to 76.77 yen JPY=EBS, not far from an all-time low of 76.25 set on EBS in mid-March. Traders cited option barriers at 76.25 yen and 76.00 yen, which could cushion the dollar's fall. Some said there was strong demand for short-dated dollar call options with strike prices around 78 yen to 79 yen, in case Tokyo does intervene. Japanese Finance Minister Yoshihiko Noda said on Friday he will consider various options if one-sided moves in the yen continue. [ID:nT9E7J800K] EURO/FRANC AT 1.20? Concerns about a spreading debt crisis in Europe and the global economic outlook have driven the safe-haven Swiss franc to near parity against the euro and record highs versus the dollar. A reduction in riskier trades funded by the low-yielding added to franc buying. Goldman Sachs said this trend has pushed the franc so far that it has become the most overvalued currency, even more expensive than the Brazilian real. At one stage this week, the franc was overvalued by as much as 71 percent. Goldman said while the SNB could announce a temporary peg to the euro, this is probably not necessary. A more effective way would be to use a managed float to guide the euro/franc higher in very narrow trading ranges. "A combination of volatility reducing measures to stem the speculative feedback loops and negative interest rates to reduce the safe haven attractiveness probably make sense as a measure," Goldman said. While a full reversal of the euro/franc back to its fair value of 1.44 is rather unlikely, "a move back to 1.20 as in our forecasts could be realistic," it said. The euro last traded little changed at $1.4246 EUR=EBS, erasing gains after data showing U.S. consumer sentiment worsened sharply in early August weighed on risk appetite.

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