By Swati Pandey
WELLINGTON/SYDNEY, Dec 5 (Reuters) - The New Zealand dollar skidded nearly 1 percent on Monday after Prime Minister John Key announced his surprise resignation and as global investors drove to safety after Italian Prime Minister Matteo Renzi said he would step down following a stinging defeat on constitutional reform.
The New Zealand dollar NZD=D4 fell to as low as $0.7070, in its the biggest percentage drop since Nov. 11.
"We've had political stability in New Zealand now for a number of years. That may not change significantly, but the resignation does add a little bit more uncertainty to the political environment that we're used to," said Philip Borkin, senior economist at ANZ.
"It's one of the reasons that the currency is a bit off."
Key, who won praise for his economic stewardship after the global financial crisis, announced his resignation on Monday, saying it was time to leave politics after more than eight years in power. hurting the currency and other riskier assets was the Italian voters' rejection of reforms, threatening to destabilise the country's shaky banking system and ultimately usher in an anti-EU government. euro slipped to its lowest against the kiwi since May 2015 EURNZD= and was last down 0.2 percent at NZ$1.4891.
The kiwi fell 0.7 percent on the yen NZDJPY= , which is considered a safe haven bet during times of uncertainty.
The Australian dollar AUD=D4 was off 0.4 percent at $0.7424, snapping two straight days of gains.
It did better against the Kiwi AUDNZD=R , rising 0.6 percent to a one-month high. The euro EURAUD= also fell 0.9 percent against the Aussie to stay near a 1-1/2 year trough.
New Zealand government bonds 0#NZTSY= gained on a safe-haven bid, sending yields down about 4 basis points at the long-end of the curve.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 3 ticks at 98.040. The 10-year contract YTCc1 climbed 7 ticks to 97.24. (Editing by Kim Coghill)