* Shilling tracking euro weakness, seen volatile * Interbank rate falls below c.bank rate for 1st time since June (Adds shilling at new record low, quotes) By Kevin Mwanza NAIROBI, Sept 12 (Reuters) - The Kenyan shilling hit a record low of 95.65 against the dollar on Monday as investors sold riskier emerging market currencies due to concerns over the euro zone's debt crisis. The shilling has taken a hammering in the past month due to worries inflation was set to get out of control and a surge in local interbank lending costs, which authorities have now managed to reined in. The euro, which has tended to reflect investors' appetite for risk or lack thereof, hit 6-1/2 month lows against the dollar on Friday due to nervousness over the outcome of a Greek debt swap deal. "All emerging markets seem to have taken a beating. There is huge risk aversion and so investors are getting out of risky assets and unwinding risky positions," said Duncan Kinuthia, head of trading at Commercial Bank of Africa. At 0852 GMT, commercial banks quoted the shilling at 95.10/30 against the dollar, weaker than Friday's close of 94.00/20. The shilling depreciated as much as 1.65 percent in intraday trade. Its previous record low was 95.10 touched on August 9, 2011. Traders said the market was also watching out for any local action that could affect the shilling after President Mwai Kibaki said last week it had asked the International Monetary Fund to front-load an existing credit facility. The central bank also said it would hold an unscheduled Monetary Policy Committee (MPC) meeting on Sept. 14, which analysts expect might be used to push up the Central Bank Rate, giving the shilling some support. "He (the president) needed to back up his comments with some actions. But with the panic coming into the market you expect people to want to cover themselves. We could see more volatility ahead of that (MPC) meeting," said Kinuthia. The weighted average interbank lending rate fell to below the Central Bank Rate of 6.25 percent for the first time since June 22. The interbank rate was at 5.6601 percent from 7.1844 percent previously, central bank data showed. The discount rate -- to be charged to banks that will borrow from central bank's overnight window on Monday -- eased to 9.34 percent from 10.13 percent, central bank data showed. It had risen to more than 30 percent last month. "That was expected, because of the calculation and because most banks are right now trying to keep a bit of liquidity in the short end to try and counter any sudden moves that could come up...if there is a huge up in rates," said Dickson Magecha, a trader at Standard Chartered Bank. Lending rates have been falling since Aug. 29, after the central bank started using a moving average of interbank rates over an unspecified period to compute its discount window rate. The move was aimed at boosting shilling liquidity after a sharp

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