By Susan Mathew
Oct 4 (Reuters) - Shares in Sydney skidded on Wednesday as a drop in oil prices dented energy-related stocks, while a weaker Australian dollar prompted some investors to trim their exposure to local assets.
The S&P/ASX 200 index .AXJO was down 33.242 points, or 0.6 percent, to 5,668.2 by 0043 GMT.
"Its a currency trade. We are in a situation where a lot of the institutional investors are away, and the Australian dollar has started to fall. The central bank yesterday tried to talk it down even further," said Mathan Somasundaram, a market portfolio strategist with Blue Ocean Equities.
The Australian dollar AUD=D4 slipped to three-month lows on Tuesday after the country's central bank held rates steady as expected and cautioned that a higher currency would drag on the economy and inflation. AUD/
The Aussie has been under pressure as its U.S. counterpart has been buoyed by expectations of another interest rate increase by the Federal Reserve by year-end.
"So in a falling currency environment, global guys will be reducing exposure, and that hits our large caps like the banks."
The 'Big 4' banks were the biggest drag on the index, down between 0.3 percent and 1.4 percent, while energy stocks were in the red with the index .AXEJ hitting its lowest in nearly 2 weeks, down 1.2 percent.
Woodside Petroleum WPL.AX lost as much as 1.6 percent, its steepest intraday loss in 1 month.
The selling was driven by falling oil prices following sizable third-quarter gains and on concerns that higher prices might spur increased U.S. shale production. O/R
Miners were also hit, with Rio Tinto (LON:RIO) RIO.AX and Fortescue Metals FMG.AX dropping over 1.2 percent each.
Consumer stocks continued to be pressured by the backdrop of intensifying competition in the retail sector. Wesfarmers WES.AX and Woolworths WOW.AX shed 0.4 percent an 1.7 percent respectively, with the latter slumping to its lowest since Jan. 31. Zealand's benchmark S&P/NZX 50 index .NZ50 tacked on 0.1 percent, or 7.3 points, to 7,942.7.
Gains in consumer stocks slightly offset losses in financial as a2 milk ATM.NZ added 3.8 percent, while Westpac Banking WBC.NZ lost 0.4 percent.
Building materials maker Fletcher Building FBU.NZ was the biggest drag on the index, down 0.6 percent.
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