The S&P/ASX200 fell 59.2 points, or 0.67 per cent, to 8,818.5, as the broader All Ordinaries slipped 56.3 points, or 0.62 per cent, to 9,094.9.
The top-200 is down roughly 0.6 per cent for the week and has tumbled more than two per cent from its record 9,054.5 close on August 22.
The rout came ahead of a keenly awaited US Federal Open Market Committee meeting, where analysts expect a 25 basis point cut to the US funding rate, Pepperstone head of research Chris Weston said.
"We saw the bulk of the selling from the open going through to roughly lunchtime, and then from there it was really just a flatline into the close," he told AAP.
"Everyone's sitting on their hands, everyone's positioned optimally for the for the Fed meeting decision and whether there's any change in sentiment that could impact equities."
Only three of 11 sectors closed higher, as financials (-0.7 per cent), materials (-0.9 per cent), real estate (-1.6 per cent) and consumer discretionary stocks (-1.1 per cent) dragged.
ANZ was the only big four bank to eke out a gain, up 0.3 per cent as CBA slipped 0.1 per cent to $168.15 and NAB (-1.5 per cent) and ANZ (-1.0 per cent) sold off.
Investment giant Macquarie Group also sunk 1.1 per cent and the insurance sector was broadly red, led by IAG (-2.0 per cent) and Suncorp (-1.5 per cent).
Large cap miners weighed on the raw materials sector, with BHP, Fortescue and Rio Tinto all down one per cent or more, as BHP announced plans to axe 750 Queensland coal jobs due to weak prices and an "unsustainable" royalty regime.
ASX-listed gold miners also bled lower, as investors took profits after spot gold hit a new all-time high above $US3,700 ($A5,540) an ounce overnight.
Energy stocks and utilities outperformed the broader market, up 0.5 per cent and 0.8 per cent, as concerns over disrupted Russian crude supply supported oil prices.
IT stocks were the only other sector to lift, grinding 0.1 per cent higher with help from REA Group, WiseTech and Xero.
Real estate was the worst-performing sector, slumping 1.6 per cent as GPT Group and Stockland each tumbled more than 2.2 per cent, and despite GPT appointing Citigroup executive Tony Osmond to its board as an independent non-executive director.
The Australian dollar is buying 66.74 US cents, up slightly from 66.65 US cents on Tuesday at 5pm, with the US dollar strength index at multi-year lows.
"It's not just a weak US dollar play, you see the Aussie working well against the Kiwi, the Pound, Euro, Yen, you name it," Pepperstone's Mr Weston said.
Australia's decent relative economic growth, stable government (compared to examples like France, the US and Japan), along with strength in China's equity market, iron ore prices and the Yuan were supporting the local currency's push.
ON THE ASX:
* The S&P/ASX200 fell 59.2 points on Wednesday, or 0.67 per cent, to 8,818.5
* The broader All Ordinaries lost 56.3 points, or 0.62 per cent, to 9,094.9
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.74 US cents, from 66.65 US cents on Tuesday
* 97.76 Japanese yen, from 97.94 Japanese yen
* 56.29 euro cents, from 56.57 euro cents
* 48.92 British pence, from 48.92 British pence
* 111.76 NZ cents, from 111.67 NZ cents
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