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Peat moss is fine for high humidity animals, when it is drier it becomes quite dusty. If you moisten it to the point where it woudln't be dusty, you would encounter such things as scale rot, excessive humidity (depedning on enclosure type), etc.
YOu want to avoid dust as much as possible. It can get impacted in their heat pits and gums over time, and as Colonel SB mentioned, it can cause respiratory problems from being inhaled. Breathing dust is not a good thing for any animal!