Dollar Off Sharply in U.S. Trading

The dollar fell sharply against other major currencies in light U.S. trading Friday after posting modest gains on European markets.

As the dollar fell, gold prices rallied. Republic National Bank in New York quoted gold as of 4 p.m. EDT at $328 an ounce, up $6.40 from Thursday’s late bid.

Currency dealers said the dollar slumped after Salomon Bros. chief economist, Henry Kaufman, said the Fed is unlikely to tighten credit conditions because of softness in the economy.

The forecast renewed speculation in the foreign exchange markets that interest rates--and hence the yields available on dollar-denominated investments--might not be rising significantly any time soon.

“The market’s been looking for some kind of direction of late, and Mr. Kaufman’s remarks came at a time when it was vulnerable,” said Martin S. McAuley, vice president for foreign exchange at Continental Illinois National Bank & Trust.