* Aussie hits parity vs US dollar for 2nd time since 1983
* U.S. dollar suffers a day before Fed policy decision
* Investors await results of U.S. midterm elections (Adds comment, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Nov 2 (Reuters) - The U.S. dollar fell on Tuesday after a surprise interest rate hike from Australia and positive euro zone economic news but analysts warned of a possible rebound if the Federal Reserve disappoints markets at the end of its policy meeting on Wednesday.
Investors also awaited the results of U.S. midterm elections on Tuesday and some analysts said a Republican win could be positive for the U.S. currency on hopes for more fiscal austerity and reduced government regulation.
But most investors have looked past elections and instead focused on a two-day meeting by the Federal Open Market Committee, which looks set to announce a second round of monetary easing on Wednesday.
Markets widely expect the Fed to commit to buying at least $500 billion in Treasury debt in the coming months. Much uncertainty surrounds the scope and pace of purchases, however, as well as the level of commitment by policymakers.
"It's not just a question of the size of asset purchases, but also the commitment they (the Fed) have to purchases. If the level of commitment is more conditional than what the market expected, that would disappoint markets," said Aroop Chatterjee, currency strategist at Barclays Capital in New York.
"U.S. data has been quite strong of late. Our economists think the Fed will take a more incremental approach and will make QE conditional on economic data," he added, referring to quantitative easing under which the Fed floods the economy with cheap money in a bid to spur a stubbornly sluggish recovery.
Analysts said the risk of a dollar recovery is building since the currency has sold off 8 percent against a basket of currencies since September on expectations of the Fed printing more money via large purchases of U.S. government debt.
Short speculative dollar positions have stayed above $20 billion in recent weeks.
David Rosenberg, chief economist and strategist at money management firm Gluskin Sheff in Toronto, expects the dollar to strengthen after the Fed announcement. "Its hugely oversold," he said.
In midday trading, the dollar index, which tracks the greenback against a basket of six currencies, was down 0.8 percent at 76.687.
The euro traded as high as $1.4052 on EBS, buoyed by a pick-up in euro zone manufacturers' output.
Traders, however, were skeptical that the euro will be able to sustain gains above this level given renewed worries about the region's sovereign debt issues.
Ashraf Laidi, chief market strategist at CMC Markets in London, said the S&P 500 stock index's inability to break through the 1,195 level suggests euro/dollar will be unlikely break out of its $1.41-1.42 congestive resistance.
"The intermarket dynamics (are) increasingly set up for a stabilizing greenback and reluctant equities," he said.
DISSENTS A FACTOR
Citigroup's head of G10 FX strategy Steven Englander wrote in a note that another uncertainty that could come from the Fed statement is "what the trade-off between dissents and QE2 commitments is."
No dissent, he said, even with a lower than expected initial commitment to an expected second round of quantitative easing, will likely eventually be seen as U.S. dollar negative as it suggests "an agreement in principle with respect to the need for QE2 and debate over the size."
By contrast, Englander said two dissents at a moderate headline quantitative easing level will be a positive for the dollar as it would suggest that "there is much more internal opposition to QE2 than the market anticipated."highest since the currency was floated in 1983. The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.75 percent as a preemptive strike against inflation. That highlighted the contrast with the Fed which is widely seen as easing policy further to help revitalize the U.S. economy and extended the differential between the two economies' two-year yields to their widest since early 2008.
The dollar edged up 0.3 percent to 80.75 yen, though it was still close to the record low of 79.75 yen set in 1995. The risk of Japanese intervention to weaken the yen was expected to mount if the dollar slips below 80 yen. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by James Dalgleish)