I have recently purchased a 1998 V90 and this evening I was poking around underneath the car when I discovered this unconnected electrical plug dangling just ahead of the horns.

Does anyone have any idea what this might be?

 

I see no disconnected plug. I see a plug with a temperature sensor connected, which is dangling.

It's for the engine control or the dash thermometer.

It should be mounted in a plastic air guide in the center of the front bumper which may be missing from your car.

There are actually two of these, and the air guide has two holes for these.

 

This is the sensor for the ambient temperature gauge in the instrument panel. It should be plugged in the front lower facia, there is a place for it there.