LONDON (AFX) - The euro was on the defensive in early trade as profit-taking took hold following yesterday's failure to break through parity with the dollar, dealers said. However, the weakness is likely to be short-lived as the dollar is expected to come under renewed pressure as equity markets continue to slide. The S&P 500 fell to a four-year low overnight as creative accounting issues came to the fore at Qwest and Bristol-Myers Squibb, while the naming of US Vice President Dick Cheney in a lawsuit against Halliburton also battered sentiment. Neil Mackinnon, chief economist at ECU Group, said profit-taking was also partly prompted by the latest rejig in the S&P 500 and the decision by Munich Re to strengthen the reserves of its US subsidiary American Re by an additional 2 bln usd. "But the downside is protected," he said. "The dollar still remains on the defensive." Rob Hayward, currency strategist at ABN Amro, said euro/dollar is also suffering a little bit by euro/yen pushing lower. "It broke a big support level yesterday and is grinding gradually lower and lower," he said. However, all market participants anticipate parity soonnn. Euro/dollar has now been below for 892 days. "It's certainly not going to make 1000 days, and it still might not even make 900," said nick Parsons, currency strategist at Commerzbank. Meanwhile, dollar/yen continues to pressured as the markets test the intervention resolve of Japan's Ministry of Finance, said ECU Group's Mackinnon. Sterling is also in focus this morning as the markets digest the latest strong data, particularly yesterday's manufacturing output data. With rates likely to be kept on hold for a while longer in the US and Japan, investors are cottoning on to the prospect of higher rates in the UK over the next couple of months, said ABN's Hayward.