The value of the pound dropped after a projection suggested the Conservatives could fail to win an outright majority in the election on 8 June. Previous opinion polls suggested Prime Minister Theresa May's party would increase its majority, which is currently 17 seats.
But the projection, published in The Times and based on YouGov research, suggests a possible hung parliament.
Sterling fell by more than half of one per cent, but recovered some losses. By early Wednesday morning, it was trading 0.44% lower against the dollar at $1.28020 and 0.29% lower against the euro at 1.14600 Euros.
The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining nearly 30 seats he Conservatives would still be the biggest party, but would not have an overall majority.
The model is based on 50,000 interviews over a week, with voters from a panel brought together by YouGov. It uses a new constituency-by-constituency model for polling, which the paper says allows for big variations.
According to The Times, the estimates were met with skepticism by Tory and Labour figures.
YouGov's chief executive, Stephan Shakespeare said the model had been tested during the EU referendum campaign, when it consistently put the winning Leave side ahead. But he added: It would take only a slight fall in Labor's share and a slight increase in the Conservatives' to result in Mrs. May returning to No 10 with a healthy majority.