KUALA LUMPUR (Reuters) - Mahathir Mohamad unexpectedly quit as Malaysia’s prime minister on Monday, leaving the country in political turmoil, but agreed to a request by the Southeast Asian nation’s king to stay on as interim premier until a successor is named.

The resignation of Mahathir, 94, broke apart a coalition with old rival Anwar Ibrahim, 72, that had scored a surprise election victory in 2018, and was not part of a pre-election promise that Mahathir would eventually cede power to Anwar.

The decision, which Mahathir did not explain, followed weekend talks between members of his coalition and the opposition on forming a new government.

The political turmoil, together with alarm in the region over the spread of the new coronavirus, sent Malaysia’s currency, bonds and stock market lower, and drew calls from some quarters for the world’s oldest government leader to return.

Differences have been simmering between Mahathir and Anwar over delays to the planned transfer of power, presenting some anti-Anwar politicians with a window to try to seek a new coalition.

The king accepted the resignation after meeting Mahathir, Chief Secretary Mohd Zuki Ali said in a statement.

“However, His Highness has given his assent to appoint Mahathir Mohamad as interim prime minister, while waiting for the appointment of the new prime minister. Hence until then, (Mahathir) will manage the country’s affairs until a new prime minister and cabinet are appointed,” Mohd Zuki said.

On the advice of Mahathir, who came out of retirement to contest the last general election, the king also assented to dissolving his cabinet, Mohd Zuki said.

There is no time frame for how long someone can stay on as interim leader, and that person can also appoint cabinet ministers, news portal The Malaysian Insight quoted Attorney General Tommy Thomas as saying.

Mahathir’s Bersatu party late on Monday rejected his resignation as its chairman and denied that he or any other member had left the camp.

Anwar and people close to Mahathir said he had quit as prime minister after accusations that he would form a partnership with opposition parties he defeated less than two years ago on an anti-corruption platform.

“He made it very clear that in no way would he work with those associated with the previous regime,” Anwar told reporters after meeting Mahathir on Monday morning.

It is unclear whether the resignation marks the end of the road for Mahathir as a full-term premier because at least three parties in his coalition called for him to stay in office. Some in the opposition have also agreed to support him.

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“The field is wide open for him,” said Ibrahim Suffian, director of pollster Merdeka. “If he considers coming back as PM, he has the freedom to choose his partners or who he would like to be part of his cabinet.”

‘UP FOR GRABS’

It is unclear what the political leaders are planning next or who might form the next government.

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A showdown is possible between Anwar and an alliance of Bersatu President Muhyiddin Yassin and Azmin Ali, who on Monday was sacked from Anwar’s party, political sources said.

Azmin and 10 other members of Anwar’s party who were at the weekend meetings - involving lawmakers from Mahathir’s coalition, the opposition United Malays National Organisation (UMNO) and Islamist party PAS - said they had acted to prevent a “conspiracy” bringing down Mahathir and to protect confidence in stability and the continuity of the government’s policies.

Constitutionally, any lawmaker who can command a majority in parliament can stake a claim to form the government. The king has to give his assent before a premier can be sworn in.

If no one has a simple majority of 112 in parliament, a new election is an option, a source close to Bersatu said.

Anwar did not say whether he would try to stake a claim to form a government. He said he had met the king to express his views and seek his advice in the interest of the country.

The ringgit fell 0.9% on the day - its steepest slide in three years - to its lowest level in almost six months.

The main stock market index slid to an eight-year low and bonds fell, forcing yields on 10-year government bonds up 5 basis points, their biggest jump since October.

Mahathir had been scheduled to announce a stimulus package to deal with the coronavirus outbreak on Thursday.

“It becomes quite hard for Malaysia to bring foreign investors back,” said Jolynn Kek, head of equity at BOS Wealth Management Malaysia, pointing to more political stability and economic growth among its neighbors.