Dollar Declines Despite Some Late Buying

The dollar fell against most other major currencies in light worldwide trading Friday, although a late upturn in U.S. activity lifted the dollar above its worst levels of the day.

At one point the dollar dropped below 3 West German marks, but the late rebound--triggered by a surprisingly large increase in the U.S. money supply--lifted the dollar back above 3 marks as New York trading wound to a close.

Currency traders and the credit markets interpreted that decline as signaling continued weakness in the economy, thereby giving the Federal Reserve more cause for easing its grip on credit. Such a move likely would result in a decline in U.S. interest rates and hence yields available on dollar-denominated investments.