The Australian dollar became investors' whipping boy on Thursday amid growing political uncertainty after several senior ministers resigned their posts, putting Prime Minister Malcolm Tunrbull's leadership in deep jeopardy.
Turnbull's Liberal Party now faces another leadership ballot after his unconvincing victory on Tuesday.
The country's parliament was dissolved on Thursday to allow for a meeting of the ruling Liberal party, with former home affairs minister Peter Dutton and Treasurer Scott Morrison seen as likely contenders for leadership.
The political uncertainty clouded the outlook for investors who punished the Australian dollar AUD=D4 , sending it 0.8 percent lower to $0.7292.
"Some have noted that Dutton's forceful position on reducing migration may become an economic negative as it will slow population growth, and further reduce demand for housing in what is already a very flat market," said Sean Keane of Triple T Consulting.
"Whether PM Dutton would favour the same policies as Minister Dutton is however unclear, and the market will now listen carefully to what Dutton has to say in his upcoming speeches."
Australia has been a revolving door of prime ministers since 2007 with no single leader completing a full three-year term since. But the Aussie typically tends to ignore politics as commodity prices and yield differentials remain its key drivers irrespective of who is in power.
But this time feels different, said Sean Callow, currency strategist at Westpac.
"Since the Liberal leadership spill on Tuesday, the AUD is easily the weakest G-10 currency - despite strong Q2 construction data on Wednesday - which suggests that this is a rare instance of the Aussie carrying a small political risk premium," he said referring to the group of 10 advanced nations.
Wednesday's data showed spending on construction work jumped 1.6 percent in the second quarter, double market forecasts. Home building was particularly strong and promised to make a solid contribution to economic activity in the quarter.
Across the ditch, the New Zealand dollar NZD=D4 inched 0.3 percent lower to $0.6678 on a broadbased strengthening in the greenback.
The kiwi went as high as $0.6718 on Wednesday on the back of strong second quarter retail sales data which suggested robust economic growth.
New Zealand government bonds
0#NZTSY= eased, sending yields one basis points higher at the long end of the curve.Australian government bond futures gained, with the three-year bond contract YTTc1 up 2 ticks at 97.985. The 10-year contract YTCc1 climbed 2 ticks to 97.480.
