Verbal Intervention and Jawboning
Central banks and finance ministries can move currency markets just by talking, without spending a single dollar of reserves, by signalling that actual intervention could follow if the market keeps moving.
Actually intervening in the currency market — a central bank buying or selling its own currency in size — is expensive and uses up finite foreign-exchange reserves. Often, officials try a cheaper first step: talking. Jawboning, or verbal intervention, is a finance minister or central banker publicly commenting that recent currency moves are "excessive" or "not justified by fundamentals," signalling that real intervention might follow if the trend continues, without having to actually commit any money yet.
This works, when it works, because traders update their expectations about future policy action based on the statement alone, and some reduce or reverse positions rather than risk being caught on the wrong side if the central bank follows through. It fails when the market decides the talk is bluff — repeated jawboning with no follow-through tends to lose its punch over time, since traders learn the words aren't backed by action.
Jawboning tries to move a currency using only the credible threat of future intervention, and its power depends entirely on the market believing that threat — which erodes each time officials talk without actually acting.
Worked example
The yen weakens sharply against the dollar over several weeks. Japan's finance minister states that the moves are "one-sided and excessive" and that authorities are "watching closely, ready to act." USDJPY drops half a percent within minutes as some traders trim long-dollar positions rather than risk an intervention. If the yen keeps weakening over the following days with no actual central bank buying, traders increasingly treat further statements as noise, and the same wording moves the market less each time it's repeated.