Concern about the price the U.S. could pay to rescue the financial system is crushing the dollar and raises questions about whether the government could ultimately intervene to prop it up.

"I'm just watching the dollar self-implode," said Brian Dolan, chief currency strategist at Forex.com. "The dollar's clearly been under pressure across the board. This is knee-jerk reaction to what many are perceiving as an explosion in the fiscal deficit and national debt."

While the plan is still being debated, Dolan believes it may end up as a net positive for the government and not the big burden the market is anticipating. The government plans to buy $700 billion in toxic mortgage debt from financial institutions as one in a series of moves aimed at unfreezing credit markets and bolstering the banking system.

"The real number that is likely to be the end result is likely to be more on the order of $100 to $200 billion. That's assuming we lose money on the trade when there's a good possibility we make money on the whole proposition, depending on how deep a discount these are valued at," he said.

At $1.48 per euro, the dollar was down 2.6 percent, its steepest decline against the euro since Jan., 2, 2001. The dollar index was also down 2.6 percent.

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Commodities gained across the board Monday as the dollar tumbled. The most dramatic move was in the oil market, where crude jumped more than $15 to $120, on the last day of the NYMEX's October crude contract. Traders said the record gain was the result of a short squeeze in crude, and a demand for physical delivery as the contract expired.

"This kind of volatility threatens to bring an official response in terms of U.S. dollar buying intervention," said Dolan.