"Thaksin is a Thai and a fellow countryman and there will be no problem should he decide to return. We are like brothers," said Sonthi, mostly Buddhist Thailand's first Muslim army chief.

A woman hands a flower to a soldier stationed at a road block near the Government House in Bangkok September 20, 2006. [Reuters]

National Police Chief Kowit Wattana said Thaksin would not face any new probes, but he would have to answer cases already filed. These include charges of election fraud and allegations that he insulted revered King Bhumibol Adulyadej.

Thaksin has said nothing in public since he tried to thwart the coup with a televised statement from New York on Tuesday.

Leaders around the world expressed shock and disappointment at the sudden overthrow of Thaksin, whose huge popularity in the countryside gave him two landslide election wins.

The United States, European Union, Australia and New Zealand condemned as undemocratic Thailand's first coup in 15 years but its 18th since it became a constitutional monarchy in 1932.

But analysts said the coup might prove a step forward if it cleared the way out of what many saw as an intractable political deadlock threatening the stability of the nation.

"This coup will be different from previous coups," said Somjai Phagapasvivat of Bangkok's Thammasat University. "Before, it was done in the interests of the military. This time, it was a necessary pre-emptive strike given the violent polarisation of Thai society."

The Thai stock market was closed on Wednesday after the coup leaders declared a one-day holiday but analysts predicted a five percent drop when it reopened on Thursday. The baht, which suffered its biggest one-day fall in three years in the hours after the coup, remained under pressure but rebounded somewhat.

The military said the coup was necessary to institute reforms to resolve a political stalemate that pitted Thaksin against the political old guard and street campaigners, who accused him of subverting democracy for his family and friends in big business.

Thaksin argued he was democracy's defender, but the crisis undermined investor confidence and curbed economic growth.

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