March 28 (Bloomberg) -- You know the U.S. dollar has problems when comedians start working it into their acts.

``Interesting fact came out today on the new $5 bill,'' Jay Leno, the host of NBC's ``Tonight Show,'' said the other day. ``It turns out it used to be the old $10 bill.''

Bill Maher, host of HBO's ``Real Time with Bill Maher,'' said of talk in Washington about scrapping the one-cent coin: ``Don't get rid of the penny, rename it the dollar. Cheer up America, you're not penniless -- you're dollar more. You can kill two birds with one stone. And then eat those birds over a trash fire in your shantytown under the overpass.''

Neither the biggest economy nor the reserve currency is that bad off, of course. Yet tell that to Brett Cosgrove, a Chicago software-firm executive I met in Sydney this week. The 47-year- old and his American traveling companions were hardly in a joking mood about the paltry pile of Australian currency they'd just received for their U.S. dollars.

``I'm feeling poorer by the day,'' Cosgrove complained. ``It really is like an American peso. It's almost depressing.''

Officials in Tokyo are even more humorless about the yen's rise to 12-year highs versus the dollar. And they're likely to be speechless about scattered predictions Japan's currency will continue surging, slamming the nation's export-driven recovery. Some traders, including David Leaver of Gain Capital's Forex.com, even think the dollar could decline to near 80 yen in a month or so from 99 yen.

`Perfect Storm'

``All factors are working against the dollar,'' the Bedminster, New Jersey-based Leaver said. ``It's a perfect storm. Whether it's interest rates, higher commodity prices, subprime loans, you name it.''

That could be quite a shock to corporate Japan, which hadn't been expecting anything close to the kinds of yen gains seen recently. ``Companies, when they come out with their earnings guidance in May, will be using rather conservative currency assumptions for their estimates,'' said Kathy Matsui, Goldman, Sachs & Co.'s chief equity strategist in Tokyo.

Upcoming data also may understate the downside risks facing the second-biggest economy. The central bank's Tankan survey next week is a case in point. It's expected to show confidence at large manufacturers falling to the lowest in four years as higher costs and exchange rates erode profits.

Yen's Surge

For overseas observers like Bill Evans, chief economist at Westpac Banking Corp. in Sydney, the yen's rise amid a possible Japanese recession is perplexing. Yet given Evans's belief that the Federal Reserve may cut short-term rates toward 1 percent in the months ahead, the dollar's prospects seem grim. Japan has little choice but to live with the yen's rise.

Ditto for Toyota Motor Corp.. Last week, Japan's biggest carmaker said it may miss sales targets this year as the yen makes its cars more expensive in the U.S. Investors also shouldn't get too excited over news that Japan's export growth unexpectedly accelerated in February as demand from emerging markets helped automakers ride out the U.S. slump. Global events have changed markedly since February.

Officials in Tokyo aren't likely to go away quietly. They're talking more and more about how currencies should reflect economic fundamentals -- code for the increasing chances of intervention. It won't work, though, unless the U.S. or the Group of Seven nations also act to weaken the yen.

Paulson's Okay

It's doubtful U.S. Treasury Secretary Henry Paulson would sign on. The weak dollar is boosting U.S. exports, helping offset declines in consumer spending. At the moment, exchange rates are among the only forces keeping the U.S. afloat. Paulson seems okay with the dollar's slide.

In the short run, the yen could rise further as Japanese investors repatriate overseas earnings amid signs credit turmoil will spread. Oppenheimer & Co.'s recent warning that Citigroup Inc.'s losses will widen amid the collapse of the U.S. subprime mortgage market spooked Asian investors.

``The charm of U.S. Treasuries has decreased rapidly,'' said Kwag Dae Hwan, head of global investments at South Korea's $220 billion National Pension Service.

Odds are growing that the BOJ will cut rates in the months ahead. While that may help slow the yen's gains a bit, this isn't about the yen -- it's about the dollar. U.S. consumer confidence fell more than expected in March, as Americans' outlook for the economy dropped to the lowest level since Richard Nixon's presidency. That's not good for the dollar.

So, Americans traveling overseas will have to get used to disappointment at the currency-exchange window. Japanese executives and politicians will have to get used to a strong yen. And while David Letterman and friends may trade quips, it's no laughing matter.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Sydney, or through the Tokyo newsroom at +81- wpesek@bloomberg.net

Last Updated: March 28, 2008 03:53 EDT