The Thai baht hit a one-week low on Thursday on lingering political uncertainties after the populist Pheu Thai party took the lead in efforts to form a government, while other emerging Asian currencies fell against a firm US dollar.

The baht weakened 0.6% and equities in Bangkok shed 0.5%, a day after the Bank of Thailand raised its key interest rate by 25 basis points.

Southeast Asia’s second largest economy has been in political limbo since the May 14 election, and the latest twist came as the Pheu Thai party abandoned support for the reformist Move Forward party that had won most seats but twice failed to get parliament’s approval for its prime ministerial candidate.

Pheu Thai, the latest incarnation of a party founded by former telecoms tycoon Thaksin Shinawatra, said on Wednesday that it would nominate real estate tycoon Srettha Thavisin as its prime ministerial candidate for a vote in parliament on Friday.

“We believe a new government could be formed soon which would give a boost to the baht,” analysts at Maybank said in a note.

The Philippine peso fell 0.5% to hit a three-week low.

Thai baht climbs as Asian currencies gain on weak US dollar

India’s rupee, Indonesia’s rupiah and the Singapore dollar eased 0.1% each.

Rating agency Fitch on Tuesday downgraded the US government’s top credit rating, a move that drew an angry response from the White House and surprised investors.

Charu Chanana, macro and markets strategist at Saxo Markets said the downgrade by Fitch had made investors more risk averse, which worked against Asian currencies.

The dollar index, which measures the greenback against six major peers, hit its highest since July 7 in the previous session following strong private payrolls data.

Markets were awaiting the closely-watched US nonfarm payrolls report due on Friday.

Meanwhile, China’s services activity expanded at a slightly faster pace in July, supported by a jump in business in the summer travel season, a private-sector business survey showed, partly offsetting the drag from the weak manufacturing sector.

The yuan traded flat, while stocks in Shanghai dipped 0.2%.

Equities across emerging Asia were broadly lower, with South Korea’s benchmark index declining 0.5%. Stocks in Kuala Lumpur and Mumbai retreated 0.3% each.

Jakarta and Manila equities rose 0.6% and 1.1%, respectively, to be the only outliers in the region.