TOKYO (Reuters) - The dollar slid to its lowest level against the yen in 10 weeks on Thursday as Japanese shares dived, prompting investors to unwind short bets on the yen amid uncertainty about the Federal Reserve's next move. The dollar fell to as low as 93.90 yen at one point as the Nikkei tumbled 6.4 percent. It last traded at 94.27 yen, a level not seen since April 4, when the Bank of Japan unleashed an audacious easing program that accelerated the yen's slide. Traders said that a lack of fresh incentives to sell yen and buy stocks - a one-way trade that dominated the market between November and May - was behind early losses for both the dollar/yen and the Nikkei, which accelerated after stop-loss orders were triggered. "There were a lot of people who were playing the higher stocks, weaker yen trade, and they're reversing out of that. But there are a lot of people who haven't got out yet, so it could fall further," said Koji Fukaya, CEO at FPG Securities. In a severely bearish signal, the dollar-yen fell below the base of its daily Ichimoku cloud at 95.963. If it closes below the cloud it will be the first time it has done so since mid-October, when the dollar was around 78 yen. The euro also slid to an eight-week low of 125.85, moving below its 100-day moving average for the first time in a year. The Nikkei and dollar-yen are now just a whisker away from their levels before the BOJ overhauled its policy, indicating that investors have begun to lose faith in a market driven by Abenomics, or Japanese Prime Minister Shinzo Abe's brand of aggressive monetary easing and fiscal stimulus. "We're basically back to where we started. It's impossible for the BOJ to do more; in fact, they did too much at once in the first place. They could have done it more gradually," said Fukaya of FPG Securities. On Thursday, BOJ Governor Haruhiko Kuroda said financial markets will eventually calm down, reflecting positive developments in the Japanese economy, and that the central bank would continue pursuing qualitative and quantitative easing. The dollar is now 9 percent lower than a 4-1/2 peak of 103.74 yen hit on May 22, a day before the Nikkei toppled 7.3 percent from a 5-1/2 year high and began a decline that has now taken it into bear territory. Currency traders are closely eyeing the Nikkei as sharp falls in the equity market prompt foreign investors to unwind the forex hedges they took out to protect themselves from a weakening yen, which means selling dollars. "We've had this pattern of falls in stocks leading to a lower dollar-yen, and a falling dollar-yen triggering losses for the Nikkei. It's a negative spiral," said Masashi Murata, senior currency strategist at Brown Brother Harriman in Tokyo. Adding to the upward pressure on the yen, Japanese investors sold a net 386.9 billion yen ($4.04 billion) in foreign bonds in the week ended June 8, after selling 1,172.5 billion yen in the previous week, according to Ministry of Finance data. Uncertainty about whether the U.S. Federal Reserve will soon decide to start tapering its easing program has also led traders to trim the bullish bets they built up on the greenback in May, which has taken it 4 percent off a three-year high of 84.498 struck on May 25. On Thursday, the dollar lost 0.3 percent against a basket of currencies to 80.685, having plumbed a trough of 80.651, a low unseen since February 20. "While the DXY has broken below its 200-day moving average for the first time since February, we do expect the USD to eventually find a near-term base against JPY, EUR and GBP," analysts at BNP Paribas wrote in a client note. "In our view, G10 moves have been largely driven by the adjustment in overextended long USD positions rather than a changing perception of the U.S. growth or Fed policy outlook." The Australian dollar dipped 0.01 percent to $0.9462, staying clear of a 33-month trough of $0.9325 plumbed on Tuesday. Pressure on the Aussie let up slightly after data showed that unemployment fell 0.1 percent to 5.5 percent in May, beating expectations that it would stay steady.

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