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TORONTO: The Canadian dollar gained almost two thirds of a US cent Tuesday as the U.S. dollar lost strength ahead of a much-anticipated U.S. Federal Reserve meeting that's expected to result in another round of stimulus to support the flagging American economy.

The loonie rose 0.64 of a cent to 99.06 cents US.

The greenback has been under selling pressure recently as investors await Wednesday's Fed announcement.

The consensus in the markets calls for the U.S. central bank to announce another round of quantitative easing in the form of monthly asset purchases of around US$100 billion a month over the next six months at the conclusion of its two-day scheduled meeting on interest rates.

Questions about the size and duration of such a program have put pressure on the U.S. dollar recently, since the stimulus measure involves the Fed printing vast quantities of currency.

Traders also looked to Tuesday's midterm elections in the United States. The contest is expected to give Republicans at least partial control of Congress by winning control of the House of Representatives. Such a victory could set up a scenario that leads to gridlock in Washington, meaning there could be a slowdown in new government spending and regulatory reform.

``Both developments should prove medium-term (U.S. dollar) negatives,'' said a commentary from Scotia Capital.

``The Republicans gaining support and potentially controlling the House will add a level of complication to agreement on a credible fiscal plan going forward, which in turn should weigh on the (U.S. dollar).''

Analysts said another reason for U.S. dollar softness was an unexpected quarter-point rate hike by Australia's central bank to deal with inflation risks.

Scotia Capital added that the loonie was also supported by increasing speculation that the Canadian government will approve the US$38.6-billion BHP Billiton bid for Potash Corp. of Saskatchewan (TSX:POT).

That's because a large takeover financed with Canadian dollars tends to boost demand for the loonie.

The Canadian dollar also found lift from resources for a second day after manufacturing data from China and the U.S. pointed to continuing expansion in the sector.

The December crude contract on the New York Mercantile Exchange rose 95 cents to US$83.90 a barrel, its highest level in almost six months.

Copper prices also advanced with the December contract on the Nymex ahead five cents at US$3.84 a pound.

The December bullion contract in New York rose $6.30 to US$1,356.90 an ounce.