"a wash or lotion for the eyes," 1866, from eye, n. + wash, n.. Colloquial use for "blarney, humbug" (1884), chiefly British, perhaps is from the notion of "something intended to obscure or conceal facts or true motives." But this, and expression my eye also may be the verbal equivalent of the wink that indicates one doesn't believe what has been said (compare French mon oeil in same sense, accompanied by a knowing pointing of a finger to the eye).