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UPDATE 2-Honduran election still unresolved; TV star's lead narrows sharply

(Adds TV host's lead narrowing sharply)

TEGUCIGALPA, Nov 28 (Reuters) - The result of Honduras' presidential election remained in limbo on Tuesday, with a gregarious TV host's surprise lead narrowing sharply as electoral authorities restarted a delayed process of publishing results.

Among the poorest nations in the Americas, Honduras has been blighted by years of gang violence, giving it one of the world's highest murder rates.

Incumbent Juan Orlando Hernandez, who won praise in the U.S. government for helping tackle the flow of migrants and deporting more drug cartel leaders, was favored to win before the vote.

But a delayed, partial count on Monday morning pointed toward a victory for TV entertainer Salvador Nasralla, 64. Inexplicably, election authorities then stopped giving results for more than 24 hours.

When, under mounting criticism from EU election monitors over a lack of transparency, the electoral tribunal began updating the site again in the afternoon, the tendency rapidly began to change.

On Tuesday evening, Nasralla's original five-point lead had thinned to 2.7 percentage points, with about two-thirds of ballots counted, according to the election tribunal results.

"They're doing everything they can to take away our triumph," Nasralla wrote on Twitter on Tuesday afternoon, as the lead started narrowing.

A victory for the president after he trailed for nearly two days could spark protests in a violent country that suffered a coup in 2009.

Nasralla, a self-described centrist, headed a center-left coalition called the Opposition Alliance Against the Dictatorship, and claimed victory on Monday - as did Hernandez.

Election official Marcos Ramiro Lobo told Reuters on Monday afternoon that Nasralla was leading by a margin of five points, with about 70 percent of ballots counted.

Lobo said Nasralla appeared certain to win, signaling that experts at the electoral body regarded his lead as irreversible.

DIFFICULT NEGOTIATIONS

On Tuesday, Hernandez reiterated that he had won, and refused to concede, telling supporters they should wait for final results.

"Nobody can call it an irreversible trend," he said, "Not even 60 percent of the ballots are counted."

The election tribunal's delay in publishing results was due to difficult negotiations between Hernandez's National Party, which had assumed it would win, and Nasralla's outsider alliance, according to two European diplomats who spoke on condition of anonymity.

Behind closed doors, the parties were discussing immunity from prosecution for current officials and how to carve up positions in government, the diplomats said.

Hernandez's National Party appears set to retain control of Congress in the election, giving it the second-most important perch in the country.

The European Union's chief observer for the election, Marisa Matias, urged officials to maintain an open channel of communication as they finalized the results.

"After two days without announcing new results, the Supreme Electoral Tribunal must establish a more fluid communication, making public balances of partial results," she said.

The electoral body was so certain that Hernandez would win that it showed unprecedented transparency during the contest, one of the diplomats said. That left the body with little room to maneuver when Nasralla came from nowhere to take a strong lead.

With a booming voice and finely coiffed hair, Nasralla is one of the country's best known faces as the host of game shows that feature scantily clad women by his side.

He is backed by former President Manuel Zelaya, who was ousted in 2009 after he proposed a referendum on his re-election. The possible return to a position of influence for one-time leftist Zelaya risks fuelling concern in Washington.

The United States has longstanding military ties to Honduras and few ideological allies among the current crop of Central American presidents.

Hernandez, 49, was credited with lowering the murder rate and boosting the economy, but he was also hurt by accusations of ties to illicit, drug-related financing that he denies.

His bid for a second term, which was made possible by a 2015 Supreme Court decision on term limits, divided opinion in the coffee-exporting nation of 9 million people.

(Editing by Alistair Bell and Lisa Shumaker)