NEW YORK (CNNMoney.com) -- The dollar tumbled Monday as investors appeared to have second thoughts about the government's proposed $700 billion bailout plan aimed at stabilizing the nation's financial system.

The 15-nation euro fetched $1.4770 in afternoon trading, up sharply from $1.4492 late Friday. Great Britain's pound jumped to to $1.8572 from $1.8365, and the dollar fell to ¥105.80 Japanese yen from ¥107.22.

Monday's decline marked the steepest one-day drop in the dollar against the euro since the euro-zone currency was formed in 1999.

"Dollar selling intensified across the board as the post-bailout hysteria subsided and questions remain on the details about which banks and credit institutions will be eligible for the purchase of bad debt and the ban on short selling," wrote CMC Markets currency analyst Ashraf Laidi in a note to investors.

The dollar's slide comes as the government plans a massive intervention in the nation's financial markets.

The Treasury Department announced plans late Thursday to use tax dollars to buy soured mortgage-related assets from Wall Street investment firms in an attempt to get the nation's economy back on track.

News of the government's rescue sparked a rally on Wall Street Friday, with the Dow rising 370 points. But stocks slumped Monday as investors awaited further details on the bailout plan and eyed a staggering rise in the price of oil.

Treasury Secretary Henry Paulson urged Congress last week to approve the rescue plan as soon as this week. But Democratic lawmakers have expressed some misgivings about the proposal in its current form.

Senate Democrats circulated an alternative plan Monday that would require the government to receive an ownership stake in the companies it helps. Democrats have also called for the plan to include caps on executive pay and possibly additional economic stimulus measures.

Meanwhile, oil surged more than $25 a barrel at one point Monday, the sharpest one-day increase on record, to trade above $130 a barrel before pulling back and settling at $120.92.

The late day rally came as the current October futures contract is set to expire and a smattering of global supply disruptions put the oil market on edge.

The dollar's decline also fueled the run-up in oil prices. Crude futures are traded in dollars and a softer greenback makes oil a bargain for overseas investors.

"Oil prices are driving everything," said Tom Benfer, vice president of foreign exchange at Bank of Montreal in New York.

The market is questioning what effect the bailout plan will have, but the price of oil has re-emerged as the main factor in the dollar's weakness, Benfer said.

"When oil shoots up, that depresses the dollar," he said.