The benchmark S&P/ASX200 index on Wednesday finished down 6.9 points, or 0.09 per cent, at 7,605.6, while the broader All Ordinaries dropped 1.3 points, or 0.02 per cent, at 7,861.0.
For the year the ASX200 is up just 0.2 per cent, after having dropped 3.8 per cent from its all-time high hit just 15 days ago, as markets reassess the pace of rate hikes given stickier-than-expected inflation and strong labour market and retail sales figures.
Overnight Federal Reserve chairman Jerome Powell confirmed that given the recent economic data, it would likely take longer to lower interest rates.
"If higher inflation does persist, we can maintain the current level of (monetary) restriction for as long as needed," Mr Powell said. "At the same time, we have significant space to ease should the labour market unexpectedly weaken."
The market's implied pricing for a July 31 US interest rate cut dropped to under 40 per cent following the Fed chairman's remarks, from roughly 50-50 a week ago.
The US dollar rose to its highest level since November against a basket of other currencies, including the Aussie, while Australian government bond yields hit their highest levels since December, pressuring equities.
The ASX's 11 sectors were mixed, with four losing ground, five gaining and real estate and financials finishing flat.
The utilities sector was the biggest mover, rising 2.8 per cent as AGL climbed 6.4 per cent.
In the mining sector, Evolution soared 7.5 per cent to a two-year high of $4.16 after the goldminer announced production was up 15 per cent to 185,252 ounces in the March quarter.
With the yellow metal changing hands at $US2,379 an ounce, other goldminers also did well. Northern Star rose 0.7 per cent and De Grey Mining climbed 5.5 per cent.
Elsewhere in the sector, BHP dropped 1.2 per cent to $44.44, while Fortescue edged 0.1 per cent lower at $25 and Rio Tinto was flat at $128.72 as it announced what chief executive Jakob Stausholm described as stable operating results in the first quarter.
The Big Four banks were mixed, with NAB dropping 0.6 per cent to $33.15, CBA dipping 0.2 per cent to $111.94, Westpac edging 0.1 per cent higher at $25.58 and ANZ basically flat at $28.37.
Bank of Queensland rose 5.2 per cent to a one-week high of $6.10 after the regional lender announced it made $172 million in after-tax cash earnings in the half-year to February 29, down 33 per cent from a year ago but better than the market expected.
"This result has been impacted by continuing industry headwinds, with heightened competition for lending and deposits and higher funding costs," said managing director and chief executive Patrick Allaway.
In industrials, Droneshield soared 18.5 per cent to an all-time high of $1.12 after NATO approved a procurement framework that the counter-drone company said would likely result in significantly more orders.
Back in the mining sector, Renascor Resources shot up 26.5 per cent to a two-month high of 10.5 cents after the Australian government approved a $185 million loan to support the development of Renascour's graphite processing project in South Australia.
The Australian dollar was close to its lowest level since November against its US counterpart, buying 64.16 US cents, from 64.20 US cents at Tuesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index on Wednesday dropped 6.9 points, or 0.09 per cent, at 7,605.6.
* The broader All Ordinaries dropped 1.3 points, or 0.02 per cent, to 7,861.0
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.16 US cents, from 64.20 US cents at Tuesday's ASX close
* 99.24 Japanese yen, from 99.13 yen
* 60.44 Euro cents, from 60.46 Euro cents
* 51.52 British pence, from 51.62 pence
* 108.66 NZ cents, from 109.05 NZ cents
16°C