The Globe and Mail reports in its Tuesday edition that the Canadian dollar is in for a beating if BofA economist Aditya Bhave is correct and the U.S. Federal Reserve hikes interest rates three times, or 75 basis points, before 2026 ends. The Globe's Scott Barlow writes that the loonie's value has primarily been driven by the difference between Canadian and U.S. bond yields and, with domestic yields unlikely to climb, the differential will only widen as the U.S. raises policy rates. In basic terms, the value of any currency is determined by the amount of foreign currency being sold to buy it. Demand for Canadian dollars, for instance, can increase as foreign investors buy Canadian property, businesses or commodities. Foreign investors can also be attracted to Canadian bonds when relative yields are high. The Canadian two-year bond yields 1.4 percentage points less than the U.S. equivalent and the Canadian dollar is trading at 71 U.S. cents. The consensus is that the Bank of Canada is on hold for the rest of 2026, so the two-year domestic bond yield will likely stay close to where it is now. If BofA is correct and the Federal Reserve hikes 75 basis points, we can expect that the loonie will fall roughly three U.S. cents.