Here's a good way to replace your power steering fluid. Note, check your owners manual but you should be using regular Dexron/Mercon type ATF III or IV in your power steering. You will have one of the following listed for your power steering fluid:
1. ATF Dexron/Mercon-III/IV (which should be the same fluid as your transmission)
2. ATF Type-F
3. ATF+3
4. regular "Power Steering Fluid" -which is not an ATF type fluid.

Don't use the wrong type of ATF as they all have different friction modifiers and will lead to a short life of your seals and rack. (Side note: ATF+3 is typically used for Chrysler built transmissions, Type-F is typically for Toyota, etc, and many Japanese manufactured transmissions, Dexron and Mercon are GM and Ford respectively and use the same fluid, -but always check your owners manual before adding fluids). Improvements in ATF fluid have been made over the years and Dexron IV replaces Dexron III, etc, so don't worry about using a newer style fluid in place of an older one.

Once you've identified the type of fluid you need (the following assumes that you need the Dexron/Mercon type), buy a good quality fluid. If it's available, go with a partial synthetic or full synthetic as this will help to recondition your seals and can help clean the system. My personal favorite is Valvoline Durablend (semi-synthetic) Dexron/Mercon IV and this is what I'm using (cost is about $2.50 to $3 a quart). Here's a step-by-step walkthrough of purging your power steering fluid:

1. I believe on your '88, you have a detached reservior that's seperate from the pump and is mounted just behind the battery. Drain the reservior with a fluid extractor (looks like a turkey baster and they sell for $1.25 at my local parts store, -typically used for adding battery acid). If you can't get one of these, then detach the lower hose and this will drain the reservior. Once drained, use a lint free cloth to wipe the inside and remove any sediment or deposits.
2. Raise the front end of the car so that both wheels are slightly off the ground.
3. Disconnect the upper hose on the reservior (return line) and place it into a bucket.
4. Refil the reservior with new fluid, up to the level of the return port.
5. Have an assistant start the car and slowly turn the steering wheel all the way to the right and left stops.
6. While he's turning the wheel, keep filling the reservior as needed. Make sure you don't let it run dry, otherwise air will get into the system.
7. The capicity of the power steering rack is about a quart, but I'd suggest buying 4 and then returning what you don't need. You should go through about 2 or so (maybe as much as 3) to purge the system.
8. Reconnect the return line to the reservior and you're good to go.
9. If you did get air into the system, just keep turning the wheel back and forth between the stops and it should all come out. Add fluid to the reservior as necessary. Avoid getting a lot of air into the system since this can be hard on the pump. If you run the pump dry, it can burn out VERY quickly since it relies on the fluid for both lubrication and heat disipation.

God bless,
Fitz Fitzgerald.
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'87 Blue 245, NA 214K