"This phrase, in which French refers to 'bad language', is employed when the speaker feels compelled to use an obscenity despite having listeners who might be offended. It's a late 19th century euphemism which first appeared in Harper's Magazine in 1895."

www.takeourword.com/Issue058.html

Other examples of using 'French' as a modifier in a 'negative' sense: French kiss (originally thought shocking), French tickler, French letter (condom), French disease (syphillis), French leave, French postcards. I'd say this comes under the rubric of what folklorists call blaison populaire, ironically a French loan, or 'derogatory ethnic insult'.

There are other suggested origins (e.g., 'seal' in French is phoque, which marginally sounds like fuck), but the one above seems the best.