* Weakness follows series of rate cuts
* Central bank also aggressively sold short-term debt
* About $7.9 bln still tied up in cenbank notes (Adds background)
ALMATY, Sept 20 (Reuters) - The tenge fell to its lowest in 10 months on Wednesday, as efforts by the Kazakh central bank to support it via interventions and sales of short-term debt showed signs of strain.
The tenge was pegged to the dollar until August 2015, when Kazakhstan switched to a free float as plunging oil prices put pressure on foreign reserves.
The central bank hiked its policy rate to 17 percent to stabilise the tenge, which went into freefall, and then gradually started cutting rates as the currency recovered.
To further encourage investors to buy the currency, it also began aggressively selling short-term tenge debt at high interest rates.
But yields on those assets have fallen along with interest rates, and in August alone investors moved about $1.2 billion in tenge equivalent into other instrument out of notes, according to central bank data.
On Wednesday the tenge fell to a weighted average of 341.61 per dollar on the Kazakhstan Stock Exchange, compared with its flotation rate of 180.
The central bank has blamed the tenge’s weakness on speculative trades and insists its interventions are only to smooth out exchange rate volatility rather than support the currency.
Its data shows it has been a net seller of foreign currency since the start of August.
It began cutting interest rates in May 2016, four months after the tenge bottomed out, but pressure on the currency has risen again as the volume of outstanding short-term debt has grown, ballooning from zero in August 2015 to 3.2 trillion tenge ($9.4 billion) by March this year.
Since then, the volume of notes has fluctuated around the 3.0 trillion tenge mark as the effective yield fell below 11.0 percent. According to data released this month, in August it fell to 2.7 trillion tenge ($7.9 billion), its lowest this year.
The central bank cut its policy rate by 25 basis points to 10.25 percent last month, surprising the market which had expected no change. (Reporting by Olzhas Auyezov; Editing by Jack Stubbs and John Stonestreet)