West Ham United manager Sam Allardyce has stated that the Hammers have not yet managed to negotiate a new deal with midfielder Mohamed Diame.

Arsenal scouts reportedly watched the 25-year-old during the east London club's FA Cup third round replay against Manchester United at Old Trafford in midweek, strengthening recent speculation the Gunners are considering a January move for the Senegal international, who has a £3.5m release clause in his West Ham contract.

Momo Diame

Allardyce, who recently revealed Arsenal are yet to table an offer for Diame, has admitted the Hammers are trying to tie the midfielder down to a more secure contract but have made little progress thus far.

"The owners have tried to renegotiate the contract, but they haven't been successful at the moment," the 58-year-old told ESPN.

Diame, who joined West Ham as a free agent in the summer from Wigan Athletic, has impressed at Upton Park this season and was the standout performer in the Hammers' 3-1 win over Chelsea in December. The player has recovered from a hamstring injury that kept him out of the last five Premier League matches and is expected to feature against QPR this weekend.

Wenger Happy with Coquelin's Progress

Meanwhile, Arsenal boss Arsene Wenger has backed holding midfielder Francis Coquelin to find success at the Emirates. The 21-year-old has made 19 appearances for the Gunners this season.

Francis Coquelin

"What Coquelin is doing is quite good. His qualities help the team to defend better. He has that ability to fly into people and win the ball back, and that's something important," the manager told the club website.

The France U21 star spent the 2010/11 season on loan at French club Lorient and Wenger feels playing regular first-team football at the Ligue 1 outfit has helped the youngster improve his game.

"It has two advantages. It lifts the potential of the player, gives him experience at the top level and convinces him that he has a chance to be successful. When the player comes back, he has experience and knowledge and you don't have to suffer for the mistakes of a beginner. It gives you more comfort to play him," Wenger added.