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President Donald Trump’s “America First” policy means the dollar will have to weaken, according to Deutsche Bank AG.

The administration’s “irreconcilable” goals of cutting trade imbalances while funding a large fiscal stimulus program pose the biggest challenge to the international monetary system since the breakdown of the Bretton Woods agreement in the 1970s, George Saravelos, global co-head of FX research at Deutsche Bank, wrote in a note. The only way to resolve these conflicting objectives is via a weaker dollar, he said.

That’s because the U.S. will probably struggle to attract sufficient foreign capital to fund its twin deficits, and that lack of appetite will likely translate to more currency weakness, he said.

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“The Trump administration continues to rely on a modern-day Bretton Woods system that has allowed U.S. consumers to live beyond their means via cheap foreign financing,” Saravelos said. “At the same time, however, Trump appears intent on ending this system to protect U.S. workers. The only way to reconcile this ‘have your cake and eat it’ approach is for the dollar to weaken.”

The Bloomberg Dollar Spot Index has already fallen 3 percent this year, adding to an almost 9 percent loss in 2017. The greenback has slumped amid U.S. political turmoil and on speculation that global central banks will follow the Federal Reserve in withdrawing monetary stimulus....

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