Mr Key will leave the top job next Monday and his successor is to be announced on the same day.
The NZX fell more than 50 points to 6854 and the dollar was up slightly on Friday's close at US71.03.
New Zealand markets have a raft of global events to deal with this week, including the resignation of Italian Prime Minister Matteo Renzi, after he suffered a heavy defeat in a referendum over his plan to reform the constitution.
An Opec meeting later this week will also put pressure on the United States currency and the euro has slumped following Mr Renzi's resignation. New Zealand is a risk market and investors are likely to take profits early and repatriate funds to their home markets.
Brokers said last night most of the reaction in New Zealand was in response to offshore events, although Mr Key's resignation was a threat to the financial stability of the country
``Indecision was created and in something away from the norm with Key's resignation,'' John Chisholm, a dealer at HiFX, said.
The focus yesterday was initially on the Italian referendum and the results of that, he said.
ASB chief economist Nick Tuffley said for the remainder of the current parliamentary term, of less than one year, the implications were minimal.
Finance Minster Bill English had played a key role in the settings of fiscal and economic policy. He, and other senior ministers, would remain as senior leaders guiding policy decisions.
There was now greater uncertainty over economic policy for the next parliamentary term, mainly through greater uncertainty over which parties would form the government, he said.
``Whether the probability of a change in government is increased or reduced will depend on the incoming prime minister. John Key's popularity with the electorate, and his ability to `sell' policies has been high, though after eight years at the top he is no longer a fresh face.''
It was possible business confidence would dip slightly in the short term and the usual pre-election slowdown of business investment decisions might be larger than normal, Mr Tuffley said.
New Zealand's main economic risks remained potential shocks from overseas, particularly through the election of Donald Trump as the next president of the US, he said.
