Foreign Exchange for Thursday, March 6, 1986 : Dollar Falls; Gold Closes Mixed

NEW YORK — The dollar fell against all key currencies except the British pound Thursday after West Germany’s central bank cut its discount rate, which money traders interpreted as a strong sign that the U.S. Federal Reserve would do likewise.

Gold prices finished mixed. Republic National Bank of New York said gold was quoted at a bid price of $342.50 as of 4 p.m. EST, unchanged from Wednesday’s late bid price.

The dollar was up during much of the day, then sagged in U.S. trading amid the speculation about a U.S. discount rate cut.

Normally, a cut in the West German rate would boost the dollar by making relatively higher U.S. interest rates more attractive to foreign investors.

But currency traders saw the Bundesbank’s discount rate reduction from 4% to 3.5% as part of a strategy by financial ministers of the five major industrialized countries to coordinate economic policies. Many sold dollars in anticipation of a cut in the U.S. rate, which stands at 7.5%.