The baht climbed to a three-month high after the Cabinet approved the measure.
The currency rose for a fourth day, gaining 0.4% to 32.115 per dollar as of 1:50 p.m. in Bangkok. It touched 32.104 earlier Tuesday, the strongest level since Dec 18, according to data compiled by Bloomberg.
The baht has advanced 1.1% in four days, paring its net loss to 3.1% since the anti-government protests began on Oct 31.
"Easing political concern in Thailand is providing support for the baht," said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc in Tokyo. "The baht also benefited from improving global risk sentiment as the fading threat of conflict in Ukraine helped boost stocks."
Thailand's economy may record zero growth or contract this year should the political unrest continue, Thai Chamber of Commerce chairman Isara Vongkusolkit said at a news conference on Tuesday. Expansion is forecast at 2% to 3% in 2014 if a new government can be formed in the third quarter, he said.
Caretaker Deputy Prime Minister Yukol Limlamthong said the emergency decree, which was imposed on Jan 22, would be ended Wednesday, three days before it was scheduled to expire automatically on March 23.
Authorities will continue to use the Internal Security Act to control anti-government protests, he said. Thailand's benchmark share gauge rallied for a fourth day after the Standard & Poors Index of US stocks rose 1% on Monday.
One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 6.5%.
The yield on the 3.625% sovereign bonds due June 2023 rose three basis points to 3.69%, data compiled by Bloomberg show. The yield reached 3.65% on Monday, the lowest level since June 2013.