The ASX 200 closed at 8,665.00 on Friday, down 37.02 points or 0.43%, after a concentrated sell-off in information technology left the benchmark weaker into the weekend and pushed Xero to a multi-year low.

Information technology fell 1.66%, making it the session's clearest drag. Xero dropped 2.81% to $57.36, its lowest close since May 2019. WiseTech Global lost 2.25% to $31.33. The two software names are among the ASX's most sensitive to long-duration valuation math, and both extended a run of pressure tied to rising bond yields and the prospect of another Reserve Bank rate increase.

Why tech led the tape lower

The move was not a broad risk-off session in the traditional sense. The ASX 200's decline was less than half the IT sector's fall, which suggests the damage was concentrated in names whose earnings are weighted toward future years. When the yield on government debt rises, those future cash flows are discounted more heavily, and the equity market reprices the sector first.

That repricing has been building for weeks. Four major Australian banks now expect the Reserve Bank to lift the cash rate by 25 basis points to 4.60% at its 28-29 September board meeting, according to InvestingLive. Market pricing has moved to about a 90% chance of that outcome. The RBA's current cash rate is 4.35%, effective 12 August 2026, and the next decision is due at 2:30pm on 29 September.

The shift in expectations followed RBA Governor Michele Bullock's appearance at CEDA on 22 September. Bullock said the jobs market remains tight, and bank economists flipped their calls after her testimony, as reported by the ABC. The labour force data have not settled the argument: unemployment rose to 4.6% in August, participation was 67.1%, and the economy added 39.5k jobs, but full-time employment fell 6.3k. The ACTU has urged the RBA to pause.

The Aussie dollar is not the driver - yet

The Australian dollar was flat at 0.7023 against the US dollar, leaving currency translation as a neutral factor in Friday's close. Crude oil traded at US$105.18. For the tech complex, the more immediate pressure is the level of bond yields rather than the currency, because the sector's valuations are derived from long-dated earnings.

A flat Aussie does matter for the broader tape, though. It gives the RBA less of a currency offset if imported inflation stays firm, and it leaves offshore earners without a translation tailwind. If the currency breaks higher after a hawkish RBA outcome, exporters and overseas-earning technology names could face a second headwind. If it falls, the inflation impulse may keep the central bank cautious.

Who held up, and what breaks the story

The index's 0.43% decline was modest compared with the IT sector's 1.66% fall, which means other parts of the market did not fall as far on average and prevented a sharper benchmark drop. FN Arena's winners and losers table for 25 September captured the session's split, but the headline was the growth end of the market: Xero and WiseTech were among the clearest drags.

For traders, the setup into Monday is straightforward. The ASX 200 enters the final session before the RBA decision at 8,665.00, with Xero at $57.36 and WiseTech at $31.33. A 25-basis-point hike is already close to fully priced, so the immediate question is the statement's tone. A hawkish hike would reinforce the bond-yield story and keep pressure on high-multiple software. A hold, or guidance that suggests the bank is near the end of its tightening cycle, would unwind some of the rate-driven short positioning that has weighed on the sector.

There is also the global yield channel. Australian tech names do not trade in isolation; they take their cue from US duration moves, and any further rise in long-end yields over the weekend would likely hit Xero and WiseTech again when Sydney reopens. Conversely, a pullback in yields would give the sector its first real chance to stabilise after Xero's slide to May 2019 levels.

For now, the close tells a narrow story: the ASX 200 lost 0.43%, but the damage was led by IT, and the two most prominent software names bore the brunt. The next test is whether the RBA delivers the hike the market expects and whether its language gives investors a reason to buy the dip or continue to cut duration exposure.