NEW YORK (Reuters) – The dollar fell on Friday as the U.S. Federal Reserve’s new policy framework suggested that interest rates would remain low, while the yen surged after Japanese Prime Minister Shinzo Abe announced his resignation.

The yen JPY=EBS significantly strengthened against the dollar after the news that Abe, Japan’s longest serving prime minister, would step down due to worsening health. [nL4N2FU0RW]

Concerns about a possible shift away from Abe’s expansionary economic policy, known as Abenomics, drove the move in the safe-haven currency, investors said.

The dollar was last down 1.0% against the yen at 105.45.

“You’re seeing yen strength on a little bit of uncertainty,” said Lou Brien, strategist at DRW Trading in Chicago. “Abenomics has been one of the more influential economic strategies.”

The greenback resumed its slide against a basket of major currencies in the wake of Fed Chair Jerome Powell’s remarks at the virtual Jackson Hole conference. Powell said the U.S. central bank would seek to keep inflation at 2%, on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation above 2% for some time. [nL1N2FT0PR]

In practice, market participants expect that this means the current ultra-low rates will stay lower for longer, thereby pressuring the dollar. After recovering from an initial slide on Thursday immediately after Powell’s speech, the dollar weakened once again overnight.

The dollar index =USD was last 0.5% lower at 92.513.

As the dollar weakened, the euro EUR=EBS climbed 0.4% to $1.1875.

The euro’s ascent puts it closer to a technical level of $1.19, said Brien, which it has tested periodically over the last month.

“If it goes through it, it could be a significant moment,” he said. “The (Fed’s) new stance on inflation gives it an opportunity to retest it.”

Currency markets were broadly pro-risk. The New Zealand dollar NZD=D3 hit its highest against the U.S. dollar since January while the Australian dollar rose to its highest since December 2018 AUD=D3.

The U.S. dollar also lost around 1.0% to the Norwegian crown NOK=D3 and 0.8% to the Swedish crown SEK=D3.

Graphic: World FX rates in 2020 here

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