UPDATE 2-Sterling brushes off poll showing narrower Conservative lead

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Updates prices, adds new quote)

By Yoruk Bahceli and Olga Cotaga

LONDON, Dec 11 (Reuters) - The pound inched higher on Wednesday in very thin trading, shrugging off an opinion poll for Britain's election that showed the ruling Conservative Party might fail to win a majority.

The narrowing of the Conservative's lead just a day before the vote has cast some doubt on the expectations of a definitive outcome that have boosted sterling in recent weeks.

The British currency was last up 0.2% at $1.3180, not far from the eight-month high above $1.32 it hit on Tuesday. Against the euro, it rose by the same amount to 84.15 pence but remained below Monday's 2-1/2 year high of 83.94.

A closely watched model from pollsters YouGov put Prime Minister Boris Johnson on course to win a majority of 28 in parliament on Thursday, down from a forecast of 68 last month. YouGov also said its model could not rule out a hung parliament, where no party gains a majority.

A poll by research company Opinium on Wednesday said the Conservatives' lead over Labour had narrowed to 12 points - a marginally better forecast than YouGov's.

The pound has rallied in recent months on growing expectations the Conservatives would gain an outright majority, helping them pass a withdrawal deal with the European Union that was agreed in October - and ending 3-1/2-years of uncertainty.

"Less Brexit uncertainty in itself can deliver a wide enough gap between growth expectations in the UK and its major partners such that sterling is not going to be a favourite short," said Geoffrey Yu, head of the UK investment office at UBS Wealth Management.

Leveraged funds held $2.44 billion in net short positions on the pound in the week to Dec. 3, CFTC data showed, and analysts said there is still room for those positions betting on a fall in sterling to be unwound, which could drive the pound higher.

In betting odds data released following the YouGov poll, the chance of a Conservative majority fell to 69% from 80% two days earlier, according to betting platform Betfair.

Betfair said this compared to an 83% chance of a Conservative majority the day before the election in 2017, when no party won a majority in a surprise result.

The probability of a hung parliament is also higher this time round - 29% rather than 14% right before the 2017 election - demonstrating the difficulty of predicting the result.

With the market betting on some sort of Conservative majority, a hung parliament could hit sterling hard, pushing it down to $1.26, according to ING analysts.

Gains in the event of a Conservative majority are expected to be less pronounced, since this outcome has largely been priced in, according to ING analysts. They expect the pound to rise to $1.35 if there's a large Conservative majority and $1.33 if they have only a slender majority.

A majority for the main opposition Labour Party - considered unfavourable to markets - could push sterling down to $1.24, ING analysts said.

(Reporting by Yoruk Bahceli and Olga Cotaga; Editing by Toby Chopra and David Clarke)