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I'm not entirely sure about it if you have multiple funds, but usually Paypal automatically converts to your currency, no matter with what currency you pay.

Currencies are converted automatically as needed, you are informed about the exact amount during the payment.
If you have 10 CAD and 10 USD and try to make a 12 CAD payment, it will take the 10 CAD and convert USD to make up for the 2 CAD difference, telling you the conversion rate and fees it's applying.
Funds are only taken from your other payment methods (CC, bank, whatever) if the sum of all currencies in your balance isn't enough to cover the payment in full.

I'm pretty sure it uses up your paypal balance first no matter what currency, before taking it out of your bank. Unfortunately. Otherwise if you can wait ~5-7? days, transfer some more CAD funds in your paypal to save the USD funds and avoid conversion fees.

I never keep any money in my Paypal account. I just put a charge through and Paypal pulls the money out of my bank account every time. If I buy something in a different currency, Paypal will tell me how much it coverts to in my local currency before I approve the transaction.