A closely watched model from pollsters YouGov indicated Prime Minister Boris Johnson was on course to win a majority of 28 in parliament at Thursday's election, down from a forecast of 68 last month.
YouGov said that its model could not rule out a hung parliament, where no party gains a majority.
The pound has rallied in recent months on growing expectations that Johnson's Conservatives would gain an outright majority in parliament, helping them pass a withdrawal agreement with the European Union that was agreed in October.
The British currency fell as low as $1.3107 in Asian trading, off a seven-month high of $1.3215 hit on Tuesday. It was last down 0.1pc against the dollar at $1.3139.
Against the euro, it was down around 0.1pc at 84.355 pence, off Monday's 2-1/2 year high of 83.940 pence.
"I think the polling is tricky," said BlackRock's head of fixed income strategy Scott Thiel, citing the emergence of a more multi-party system in Britain, which has traditionally been dominated by two-party politics, as well as the split between Brexit and national policy issues.
"It's very difficult to call the outcome of a political event ... so we are going to be concerned of our ability to get this right or wrong," he said.
While gains in sterling are expected to be less pronounced in the event of a Conservative majority, given the market is largely pricing this in, much larger losses are expected if that fails to happen, ING analysts said in a client note.
They expect the pound to rise as high as $1.35 in the event of a large Conservative majority, or $1.33 if the majority is slender. A hung parliament could push it down to $1.26.
A majority for the main opposition Labour Party - considered unfavourable to markets - could push it down to $1.24, ING said.