Dictionaries are not particularly enlightening on this, except to say that it first appeared in the 19th century and can also be spelt 'welch'. Could it have anything to do with an English stereotype of a Welsh national characteristic of being a bit shifty? In the same way as other Celtic nations are characterised by the English as dim (Irish) or mean (Scottish)? (This, I should add, is NOT the opinion of the author - no Anne Robinsons here).