"When do you think the U.S. dollar will begin rising against the Canadian dollar?"

I wrote him back:

"Bob, I think the Cdn Dollar will outperform. The Looney is strong, at 82.0 cents American. The multi-year high is just under 85 cents, but the Looney could exceed that before year-end, I feel.

If the Cdn economy gets even hotter, than it is, then the Bank of Canada will have to raise rates, which would strengthen our dollar further.

I don't see it going down, anytime soon, unless commodity prices, including oil & gas, go into the tank.

As I see it, the U.S. 2-year Treasury Note is yielding more than the 10-year in Canada, so there ought to be no reason that the Bank of Canada blinks before the Fed. If that were the case, then as the Fed continued to raise rates, the USD would strengthen against the Looney.

So if you're looking for weakness in the Looney, keep your eyes open for comparative weakness in the Cdn vs U.S. economy. But get some sleep because it might be a while.

I hope you enjoy the blog. Thanks for writing in. /Bill "

What I'm saying here is that the Bank of Canada is in good shape. Not only is the economy operating very well, but international trade plus the government fiscal budget are also in very good shape. Unlike America.

If the economy strengthens relatively faster than in the U.S., Canada will have to raise rates faster, which would narrow the rate gap with the U.S. and remove some of the current buying pressure on the Cdn Dollar. But the stronger Cdn economy is going to keep the Cdn Dollar stronger.

On the other hand, if the economy softens in Canada, the Bank of Canada can then keep its rates low, which would serve to widen the gap in rates with the U.S., as the Fed is committed to continuing to raise U.S. rates. In that case, the Cdn dollar would likely weaken, helping to boost the export-sensitive economy, but the Bank of Canada would then also quickly narrow the rate gap, thereby keeping the Cdn Dollar strong. That's a great position to be in.

Bottom line is that the U.S. deficits in both international trade and government spending are so extreme that the trend of the USD will likely remain down. Long-term, traders have to acknowledge fundamentals. Sentiment can materially affect cycles, but not for the long-term.

The USD has been stronger than I anticipated in the past year only because the U.S. economy has fared relatively better than those in Europe (especially Germany) and Japan. I just did not expect the relative weakness there without similar weakness in the U.S.

I guess the military spending, the political pork spending, the hyper-inflated real estate development industry, and the tax concessions there, has served America well " for the short-term.

But as soon as economic growth in the other major economies picks up at all " and it will -- those currencies will also pick up, causing the USD to weaken. In that event, buyers will move increasingly into the Cdn Dollar as well.

So the 30-60-90-day forward rates, which you can find posted daily at Yahoo Finance, will likely continue to show a rising Cdn Dollar. That will happen until the fundamentals change.

By reading the latest articles from Reuters, Bloomberg and Yahoo Finance, you will be able to keep yourself up to speed on this issue if it's important to you.

A comment to this blog this week came from gocurrency.com, which has a regular outlook.

I think it pays to read as much as possible. Clearly, we all have our own opinions, but it's good to know what other's think.