The benchmark S&P/ASX200 index on Friday dropped 35.1 points to 8,294.1, a loss of 0.42 per cent, while the broader All Ordinaries fell 34.1 points, or 0.4 per cent, to 8,543.7.
The ASX200 gained 0.5 per cent for the week after falling 0.1 per cent the previous week.
AMP deputy chief economist Diana Mousina said US 10-year bond yields had climbed to just under 4.7 per cent, their highest level since October 2023, when there was concern about the US fiscal situation.
US bond yields are rising because expectations of US rate cuts in 2025 have been pared back given the Federal Reserve's more hawkish commentary in December, as well as expectations of an inflationary agenda once Donald Trump takes office on January 20.
The US dollar has been rising along with US yields, Ms Mousina said, meaning the Aussie had been slipping against it.
Overnight, the Aussie sank to its lowest level in more than two years against the greenback, at 61.72 US cents.
By 4.50pm Friday the Aussie had rebounded a bit, buying 61.93 US cents, unchanged from around the same time Thursday.
Important monthly US jobs data known as the non-farm payrolls report to be released overnight could shift expectations for US rate cuts.
Also on Friday, ANZ's economics team brought forward its forecast for domestic rate cuts, predicting the RBA would trim rates in February rather than May given this week's cooler-than-expected inflation print for November.
Ten of the ASX's 11 sectors finished lower on Friday, while materials/mining climbed 1.0 per cent.
The financial sector was the biggest loser, dropping 1.2 per cent amid losses for all of the big four banks.
Westpac and CBA both dropped 1.7 per cent, to $32.60 and $156.05, respectively, while NAB subtracted 1.1 per cent to $37.95 and ANZ dipped 0.3 per cent to $29.29.
It's possible traders were taking profits from banks and rotating into the beaten-down mining sector, as Morgan Stanley suggested clients to do in October.
BHP rose 1.0 per cent to $39.68 and Rio Tinto grew 2.2 per cent to $119.04, with Fortescue edging 0.1 per cent higher at $17.93.
Goldminers were ascendant again as the precious metal changed hands at a four-week high of $US2,672 an ounce.
Evolution rose 1.4 per cent, Newmont gained 1.6 per cent and Westgold recouped some of Thursday's losses with a 4.0 per cent gain.
Star Entertainment Group was the worst performer for a second day, plunging 15.4 per cent to an all-time low of 11 cents as Queensland Premier David Crisafulli rejected a bailout for the cash-burning casino company, which is rapidly running out of money.
"I want Queenslanders to know that we're not in the business of being concerned about the corporate suits who sit around a company," he told reporters on Friday.
Back in the financial sector, Insignia Financial grew 2.0 per cent to $4.12 after reports Brookfield was weighing a bid for the wealth manager, which is considering an offer from CC Capital Partners.
ON THE ASX:
* The benchmark S&P/ASX200 index on Friday dropped 35.1 points, or 0.42 per cent, to 8,294.1
* The broader All Ordinaries fell 34.1 points, or 0.4 per cent, at 8,543.7
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 61.93 US cents, from 61.94 US cents at Thursday's ASX close
* 98.03 Japanese yen, from 97.99 Japanese yen
* 60.13 euro cents, from 60.15 euro cents
* 50.35 British pence, from 50.32 pence
* 110.74 NZ cents, from 110.73 NZ cents
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