Dollar Falls in Late U.S. Trading; Gold Posts Gains

Expectations of lower interest rates and mixed signals on the U.S. economy pushed the dollar lower late Friday against all major currencies.

The price of gold bullion was higher in most markets. Republic National Bank of New York said gold was bid at $325.50 an ounce at 4 p.m. EST, up $1.25 from late Thursday’s bid.

The Federal Reserve added funds to the U.S. banking system for a second straight day Friday by arranging the temporary purchase of government securities. The move increased speculation that the Fed was preparing to cut the discount rate--its interest on loans to financial institutions--to 7% from 7.5%. Such a cut could send other interest rates falling further, making returns less attractive on dollar-denominated investments.

On the economic front, the Commerce Department said the U.S. economy is growing at an estimated annual rate of 3.2% in the yet-to-be-completed fourth quarter, slightly above the market’s expectations. But the government revised downward its estimate of growth in the third quarter to 3% from the previously 4.3%.

James McGroarty, a vice president of Discount Corp. of New York, a government securities dealer, said the figures from the Commerce Department roughly canceled each other out.

Martin Egli, senior vice president and deputy general manager of Switzerland’s Bank Julius Baer & Co. in New York, said the net effect was to cause people to sell dollars.

In Europe, dealers described the market as listless, with most traders seeking to avoid exposure to new risks ahead of the Christmas-New Year holiday season.