The S&P/ASX200 fell 2.5 points by midday, down 0.03 per cent, to 8,939.8, as the broader All Ordinaries lost nine points, or 0.1 per cent, to 9,259.5.
The Australian dollar spiked above 70 US cents for the first time since February 2023 on Wednesday morning, as the US dollar strength index plummeted to a four-year low as the "de-dollarisation" trade gathered pace.
US president Donald Trump's attempts to strongarm EU allies into handing over Greenland had been a turning points for investors, Capital.com senior market analyst Kyle Rodda said.
"Fundamentally, the on again off again tariffs on trading partners, threats against public officials at the Fed, hair-brained fiscal policy, and overall capriciousness in trade policy, foreign policy and economic policy has pushed market participants over the edge," Mr Rodda said.
"Whether this is a market tapping out for the rest of Trump's term or a permanent rupture is a matter of debate."
The greenback slump has supported commodity prices, helping raw materials and energy stocks counterbalance weakness in most other sectors.
Iron ore giants BHP and Rio Tinto each gained more than 0.9 per cent each, while gold miners were broadly positive as the precious metal pipped a seventh record high in as many sessions on Tuesday.
Gold is trading hands at US$5,172 ($A7,391) an ounce, after spiking above $US5,190 the previous day and supported by US dollar weakness, helping push Northern Star (+3.3 per cent) and Evolution (+1.9per cent) higher, while Denver-headquartered Newmont edged 0.3 per cent higher.
Energy stocks outperformed the bourse, up 1.4 per cent as oil surged to four-month highs, helping lift Santos, which gained 1.4 per cent, and Woodside, which jumped more than two per cent to $24.83 with help from a record production year.
Ampol shares slipped 2.2 per cent, after margins in it fourth quarter trading update were hit by product cracks and outages, coinciding with Russian sanctions.
Elsewhere in the sector, coal miners were mixed and uranium stocks improved, with Boss Energy a cut above and up more than seven per cent after cutting its cost guidance.
The heavyweight financials sector slipped a benign 0.1 per cent, with Commonwealth Bank the best of the big four with a 0.5 per cent improvement, while ANZ edged 0.3 per cent lower and the other two traded roughly flat.
IT stocks underperformed, tumbling 1.4 per cent despite a strong overnight performance on Wall Street's tech-heavy Nasdaq ahead of key earnings from Microsoft, Meta and Tesla due overnight on Wednesday.
In a broad-based slump, ASX-listed players like WiseTech (-1.5 per cent), NextDC (1.6 per cent) and California-headquartered Life360 (-6.5 per cent) all lost ground.
Consumer staples stocks also took a hit, the sector shedding 0.8 per cent and tracking with dips in Coles and Woolworths.
In company news, Droneshield shares fell more than three per cent after chief executive Oleg Vornik told investors his decision to unload $50 million in company stock was to secure his future.
Investors have largely forgiven the pullback, with the defence technology stock trading more than 20 per cent higher than just before Mr Vornik sold the stock in November.
The Australian dollar is buying 69.99 US cents, after spiking on the back of hotter-than-expected December quarter inflation data, increasing pressure on the Reserve Bank to consider hiking interest rates ahead of its first 2026 meeting next Tuesday.
The RBA's preferred trimmed mean consumer price index figure rose to 3.8 per cent in the year to December, up from 3.4 per cent in the 12-months to November and well-beyond its 2-3 per cent target.
Inflation was not moving decisively in the right direction, VanEck Head of Investments & Capital Markets Russell Chesler said.
"With unemployment still low at 4.1 per cent, household spending resilient and property prices continuing to rise, it is no longer a question of if rates move higher, but when the RBA acts and how many hikes ultimately follow this year," Mr Chesler said.
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