The dollar and gold prices fell Friday after President Bush's offer to negotiate with Iraq defused some tensions about the Middle East crisis.

At a news conference Friday, Bush invited Iraq's foreign minister to come to Washington and the president offered to send Secretary of State James Baker to Baghdad to discuss ways of ending the 4-month-old standoff.The dollar, traditionally a safe haven for investors in times of international strife, surged after the U.N. Security Council's voted late Thursday to allow the use of military force if Iraq has not withdrawn from Kuwait by Jan. 15.

Bush's comments on Friday eased some fears about the conflict and the dollar sank accordingly, dealers said.

Earl I. Johnson, an assistant vice president with Harris Trust & Co. in Chicago, said the dollar could not sustain its gains because of the weakening U.S. economy and the expectation that the Federal Reserve will lower interest rates to boost business activity.

The dollar, like all currencies, is supported by higher interest rates. When yields are up, U.S. investments become more attractive to foreigners and there is more demand for the dollar to purchase this country's securities.

The dollar was little changed against the British pound in New York, and closed up against sterling in London. The British currency faces interest rate problems of its own - the new Major government is expected to push Britain's rates lower.

The pound edged down to $1.9430 in New York from $1.9435 late Thursday. In London earlier, the pound was quoted at $1.9440 in London, compared to late Thursday's $1.9485.

The dollar fell to 132.50 Japanese yen in New York from 133.25 Thursday. In Tokyo, the dollar rose to 132.75 yen from 130.15 yen Thursday, and in London, it fell to 133.05 yen.

Other late dollar rates in New York, compared with late Thursday's prices, included: 1.5020 German marks, down from 1.5040; 1.2770 Swiss francs, down from 1.2805; 5.0580 French francs, down from 5.0775; 1,125.25 Italian lire, down from 1,129.50; and 1.16475 Canadian dollars, up from 1.16445.