By Chris Thomas
Sept 21 (Reuters) - Australian shares slipped to a three-week low on Thursday with broad-based losses after the U.S. Federal Reserve signalled it still expects one more interest rate hike by the end of the year despite a recent bout of low inflation.
As expected, the Fed kept interest rates unchanged on Wednesday and said it would begin reducing its balance sheet in October, but also suggested that a third hike might be on the table in December. think that's quite negative in the context that the market was pricing in a relatively weak U.S. dollar as they assumed the Fed won't be doing much," said Mathan Somasundaram, a market portfolio strategist with Blue Ocean Equities. "There's a fair amount of pressure on the market - as interest rates go up, asset prices have to come down."
The Australian dollar AUD=D4 backtracked to $0.8010, from a peak of $0.8105, after the Fed's comments. AUD/
The S&P/ASX 200 index .AXJO fell 51.89 points, or 0.9 percent, to 5,657.2 at 0245 GMT, and was headed for its third session of falls in a row. The benchmark fell 0.1 percent on Wednesday.
Material stocks drove the losses on the index, with BHP Billiton (LON:BLT) BHP.AX and gold miner Newcrest Mining NCM.AX falling as much as 1.1 percent and 3.8 percent, respectively, to their lowest in over four weeks.
Chinese iron ore futures fell to their lowest level in nearly two months on Wednesday, while gold fell to an over three-week low. IRONORE/ GOL/
Commonwealth Bank of Australia CBA.AX rose as much as 0.8 percent in morning trade after the lender said it agreed to sell its life insurance arm to Hong Kong's AIA Group Ltd 1299.HK for $3.05 billion, in the biggest Asian buyout of an Australian financial services firm. The bank's shares have since eased back since to trade marginally lower.
It was rare respite for CBA shareholders, with the stock down 9.1 percent since money-laundering allegations broke on Aug. 3.
The other three of the "Big Four" banks fell with the rest of the market.
New Zealand's benchmark S&P/NZX 50 index .NZ50 fell 46.06 points, or 0.6 percent, to 7,773.18 at 0245 GMT.
Construction firm Fletcher Building Ltd FBU.NZ was the biggest drag on the index, falling as much as 5.2 percent to hit an eight-week low.
Meanwhile, data showed New Zealand's gross domestic product jumped in the second quarter, with economic growth a central issue in the country's impending general election. ruling National Party regained a wide lead over the opposition Labour Party in an opinion poll on Wednesday after party leaders went head-to-head in the final debate before Saturday's election.