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ASX 200 hits over 2-month low

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Most sub-indexes decline

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Financials mark six straight weekly losses

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NZX 50 touches lowest since July 28

Sept 23 (Reuters) - Australian shares closed at their lowest in more than two months on Friday, returning from a one-day holiday, as banking stocks fell after the U.S. Federal Reserve hiked interest rates and maintained its hawkish stance on policy tightening.

The S&P/ASX 200 index ended 1.9% lower at 6,574.70 points, its lowest since July 1. The benchmark declined 2.4% for the week.

The Fed lifted rates by an expected 75 basis points (bps) on Wednesday and signalled a longer trajectory for policy rates than markets had priced in, fuelling fears of further volatility in stock and bond trading.

"In today's session, we are basically playing catch up on 2 U.S. sessions which is why the ASX is in a huge sell off," said Azeem Sheriff, markets analyst at CMC Markets.

"Although the U.S. and Australia have different levels of inflation, the principle remains the same that, inflation is still high and the impacts of rate hikes haven't really flowed through yet to consumers."

Markets have largely priced in a 50 bps hike in October, with 25 bps each in November and December.

Financials slipped 1.7% to hit an over two-month low. It slumped 1.7% for the week and marked six consecutive week of losses. The country's "Big Four" banks fell between 0.9% and 1.9%.

Weak oil prices weighed on energy stocks that retreated 2.1% on Friday and marked a 2.1% drop this week.

Heavyweights Woodside Energy and Santos fell 2% and 4.3%, respectively.

Technology stocks declined 4.4%, tracking an overnight fall in their Wall Street peers. ASX-listed of Block and software maker Xero fell 8.9% and 7.8%, respectively.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 closed 0.7% lower at 11,434.82 points to hit a near two-month low. (Reporting by Upasana Singh in Bengaluru; editing by Uttaresh.V)