By Inyoung Hwang Jan. 29 (Bloomberg) -- The dollar will benefit as a potential “financial stone age” for Greece and other nations threatens to break up the euro, according to Walter J. Zimmermann Jr., chief technical analyst at United-ICAP. The greenback may rise to a level last reached more than six years ago against the currencies of major U.S. trading partners as the European budget crisis reduces demand for higher-yielding assets, according to Zimmermann, whose firm is a technical research unit of ICAP Plc, the world’s largest inter- dealer broker. “There’s a high risk for some sort of fracturing of the euro by mid-2011,” said Zimmermann, 58, in a telephone interview from Jersey City, New Jersey. “The same fear response that drove the rally from March ‘08 to March ‘09 will cause the dollar to act as a safety vehicle.” The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies including the euro, yen and pound, may increase by the middle of 2011 to at least 93, according to Zimmermann. The gauge of the greenback rose today to 79.156, the strongest level since Aug. 19. The index reached a three-year high of 89.624 on March 4. The U.S. currency will rally as investors seek refuge from a “massive economic implosion,” according to Zimmermann, who wrote in a Jan. 21 research note that the U.S. stock market’s advance in 2009 is similar to a 1929-1930 rebound that was followed by a Depression-era rout. Under a bearish scenario, stocks will reach bottom in 2014-2015, according to Zimmermann. In Minsky’s Footsteps Drawing on the late Hyman Minsky’s model for debt cycles, Zimmermann predicts a potential “financial stone age” in which Greece, Spain, Portugal and Ireland struggle to contain their budget deficits and default on loans with no lender of last resort such as the Federal Reserve. Minsky was a U.S. economist who argued that capitalist economies trigger waves of credit expansion and asset inflation that are followed by credit contraction and asset deflation. Economists paid attention to him when the subprime crisis roiled markets. That was the “Minsky moment,” when credit dried up. European Central Bank President Jean-Claude Trichet on Jan. 14 dismissed as an “absurd hypothesis” a suggestion that Greece may be forced to exit the euro area. The euro, which accounts for 57.6 percent of the Dollar Index, will fall to a range of $1.15 to $1.17 by the middle of 2011, according to Zimmermann. The median forecast of 14 analysts in a Bloomberg News survey is for the euro to trade at $1.41 by the end of 2011. The dollar’s status as the world’s main reserve currency will also help drive its rally, according to Zimmermann. With most of the world’s debt priced in dollars and further “unraveling” expected in the commercial real estate market, there will be a growing need for dollars to pay debt, he said. Futures on the Dollar Index expiring in March increased for a fourth straight day, rising as much as 0.3 percent to 79.335. The dollar rallied today as much as 0.4 percent to $1.3913 per euro, the strongest level since July 14.

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