Pressure had begun to build in February, and by March the implied interest rates to borrow NZ dollars in the FX swap market were rising rapidly (Figure 5). Despite cutting the OCR to 0.25 percent, the implied NZ dollar interest rates had risen to nearly 2 percent to borrow for one week and had spiked to around 20 percent to borrow overnight.
This was spilling over into the bank bill market and other indicators of short-term wholesale funding costs in New Zealand money markets.