The dollar suffered record losses against the euro on Monday as the potential negative consequences of the government’s $700 billion rescue effort weighed heavily on the currency.

The greenback's weakness helped push equities sharply lower, including a loss of 373 points on the Dow, and sent crude oil prices to its biggest one-day price increase ever.

The dollar was down 2.33% to $1.4802 per euro as of 4:22 p.m. EDT. At its lows, the dollar was down to $1.4435 per euro, the lowest level since late August.

The losses were the worst for the greenback against the euro since the European currency debuted in 1999.

“It’s an indictment of what Ben Bernanke and Hank Paulson are trying to pull off," said Peter Boockvar, equity strategist at Miller Tabak. “People are realizing that the government’s plan is not necessarily going to be the answer.” 

The Treasury’s $700 billion rescue would allow the government to buy and hold toxic assets currently stuck on banks’ balance sheets. The plan is aimed at restoring confidence in the financial system and allowing banks to return to lending to businesses and individuals.

Pushing the nation’s debt level to new heights is among several potentially negative consequences of the massive bailout. Purchasing the illiquid assets from banks could push the government’s debt ceiling up by 6.6%. Even before the Treasury plan emerged, the Congressional Budget Office was already forecasting a budget deficit of $438 billion for the next fiscal year.

There remains considerable uncertainty about the final structure of the $700 billion rescue effort that began to take shape last Friday. Congressional leaders have said a vote could come on the package by the end of the week, but Democrats have pushed for new provisions such as help for homeowners and curbs on executive compensation, and the process could extent into the next week. 

Sen. Chris Dodd, D-Conn., has sought to include provisions that would give the government equity in financial companies if their toxic assets lose value and cause the government to take a loss.

The dollar has also been hurt by raised expectations that the Federal Reserve will increase interest rates before the end of the year. The new hopes for a rate cut have been fueled by the latest turmoil in the financial sector, including the bankruptcy of Lehman Brothers (LEH) and an $85 billion emergency loan to American International Group (AIG). 

An interest rate cut would have negative consequences for the already-weakened greenback. The Fed has slashed interest rates by 3.25 percentage points since a year ago as the economy has slowed.