TOKYO, Japan -- The dollar gained ground Wednesday in Asian trade on speculation that investment bank Goldman Sachs may make a last-minute deal to take over troubled Lehman Brothers, dealers said.

The dollar firmed to 107.12 yen in Tokyo afternoon trade, up from 106.89 in New York late Tuesday.

The euro, which hit an 11-month low on Monday, edged up to $1.4160 from $1.4134 on rebounding oil prices. The single European currency also firmed to 151.65 yen from 150.91.

The greenback and global equities markets have been hit hard after talks collapsed between Lehman Brothers and a consortium of South Korean banks.

But Lehman Brothers said it would make an announcement later Wednesday on "key strategic initiatives," fuelling rumors of a move by Goldman Sachs and helping shore up the dollar, dealers said.

"Players expect now some forward-looking comments. Currencies had been oversold recently against the yen and many players took this news as a trigger to buy back," Resona Bank dealer Keiichi Iguchi told Dow Jones Newswires.

Lehman shares had nosedived 44 percent overnight on speculation the bank will not be able to raise desperately needed capital.

Forex markets were still cautious as gloom over the US economy and the health of the financial system weighed on sentiment, dealers said.

"The US financial worries are cooling sentiment. People still want to see what the US authorities are going to do to stabilize things after the turmoil, including at Lehman," said Satoru Ogasawara, Credit Suisse economist in Tokyo.

"The US economy is expected to stay weak in the coming weeks" which will further pressure the dollar, he added.

Market sentiment quickly soured after markets on Monday cheered a US federal plan to seize mortgage finance housing giants Fannie Mae and Freddie Mac to contain the sector's bleeding.

The dollar's rise was capped on a bigger-than-expected fall in July US home sales, underlying fears that housing market troubles are here to stay.

"Subprime-related financial market problems are deep-rooted," said Masanobu Ishikawa, manager of foreign exchange at Tokyo Forex and Ueda Harlow.

"While this news on Lehman may provide short-term relief, the overall downward correction in currencies such as the euro and the pound is still likely to continue," he said.

The dollar fell to 1.4304 Singapore dollars from 1.4340, to 1,093.50 South Korean won from 1,102.20 and to 9,325 Indonesian rupiah from 9,360.

It held steady at 31.87 Taiwan dollars, 46.74 Philippine pesos and 34.60 Thai baht.