Sterling gains tempered as Kraft bid flow hopes ebb

* Sterling hits 3-mth high vs dollar of $1.6844 GBP=D4

* But Kraft unchanged bid for Cadbury takes shine off pound

* Perceived BoE end to QE, weak dlr, risk appetite lift stg

* Trade-weighted sterling highest in nearly eight weeks

LONDON, Nov 9 (Reuters) - Sterling hit a three-month high against a broadly weaker dollar on Monday, tracking gains in currencies seen as higher risk as equity and commodity markets rallied.

It came off highs, however, pulling away from an earlier near eight-week high against the euro after Kraft Foods (KFT.N) launched a hostile bid for Cadbury (CBRY.L) on the same terms as previously, without sweetening its offer. [ID:nL9380032] [ID:nL918790]

Cadbury shares turned lower after the news, with analysts believing that the ensuing bidding battle could be drawn out for the next few months, delaying any potential sterling-positive M&A flows.

"The Kraft/Cadbury bid took a bit of the shine off sterling. It will have an M&A effect (in favour of sterling) at some point in the future, but the currency influence will be much further down the road and this isn't a currency issue right now," said Maurice Pomery, managing director at Strategic Alpha.

The UK currency has been broadly firmer since the Bank of England last week increased its quantitative easing programme by 25 billion pounds, in what investors believe is likely to be a final top-up.