U.S. puts off decision on cutting aid to Honduras

(For a TAKE A LOOK on Honduras, click on [nN28343997])

* No decision on U.S. assistance before Monday

* Washington tries to play limited, behind-the-scenes role

* U.S. official praises Zelaya for delaying his return

By Arshad Mohammed and Deborah Charles

WASHINGTON, July 1 (Reuters) - The United States will put off deciding whether to cut off aid to Honduras until next week, allowing time for a negotiated solution that it hopes will reverse Sunday's coup against President Manuel Zelaya, a U.S. official said on Wednesday.

Mindful of its history of intervention in Latin America and, at times, of backing coups, Washington is trying to play a limited, behind-the-scenes role to show support for democracy and for Zelaya' restoration without being accused of meddling.

Washington believes it was "wise" of Zelaya to postpone his planned return on Thursday to the Central American country, the official said.

Zelaya, in office since 2006 and due to step down next year, was ousted in a dawn coup on Sunday after he angered the Honduran judiciary, Congress and the army by his push to extend presidential mandates beyond a single four-year term.

The Organization of American States gave Honduras an ultimatum early on Wednesday to allow Zelaya back into office by this weekend or face suspension from the hemispheric group.

The 34-member group gave its secretary-general, Jose Miguel Insulza, a mandate to head diplomatic efforts to restore democracy and to reinstate Zelaya, a leading role that the U.S. officials hope may limit their own involvement.

"We will wait until the secretary-general has finished his diplomatic initiative and reports back ... on July 6 before we take any further action in relationship to assistance," a senior Obama administration official told reporters.

"We think that President Zelaya's decision to postpone his earlier decision to return to Honduras on Thursday was a wise one," the official added, saying it was important to give the OAS time to craft a solution so Zelaya can return peacefully.

'STRESS TEST' FOR U.S. ON DEMOCRACY?

The Honduran interim government on Wednesday took a hard line, saying there was "no chance at all" of Zelaya returning to office. U.S. officials feared that if Zelaya flew home this week it could spark a confrontation and possibly violence.

Experts on Latin America said the coup had quickly become a "stress test" for the U.S. government's commitment to defending democracy in Latin America.