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The explosion comes a day after the military urged both sides to settle their differences in the more than two-month long dispute, in which protesters are trying to bring down the elected government of Prime Minister Yingluck Shinawatra.
"There were 28 people injured from the blast at the Victory Monument," Suphan Srithamma, director general of the Bangkok Emergency Medical Centre, told reporters. "Among these seven people were seriously injured."
Witnesses said they heard two explosions.
"The first blast I heard was from behind the stage," said Teerawut Utakaprechanun, who told Reuters Television he had been turning out for the protests every day.
"People were looking around. I saw the security guards running after a suspect. After one minute I heard another bomb blast."
On Friday night, one man was killed and 35 protesters were wounded in a grenade explosion in the capital. That takes to nine the death toll since the protests started in November.
They form the latest episode in an eight-year conflict pitting Bangkok's middle class and royalist establishment against poorer, mainly rural supporters of Yingluck and her brother, the self-exiled former premier Thaksin Shinawatra.
The protesters accuse Thaksin of nepotism and corruption, and aim to eradicate the political influence of his family by altering electoral arrangements, though in ways they have not spelt out, along with other political reforms.
The firebrand leader of the anti-government protests, Suthep Thaugsuban, spent much of Sunday leading thousands in a march through Bangkok demanding that Yingluck resign, and collecting bundles of cash from supporters in the streets in what has become a trademark of his public appearances.
However, there are signs the protests against the government could be running out of steam. The government has allowed protesters to take over key buildings without confrontation and, crucially, the military has so far remained neutral.
"Now all of us need to help each other in taking care of our own nation," supreme armed forces commander Thanasak Patimapakorn told reporters after Saturday's Army Day parade.
"The relationship between the government and the army is normal ... We need to respect law and order. I myself respect the law and I respect all sides and I request that all sides should come together and talk to find a solution," he said.
Separately, the Bangkok Post daily quoted Thanasak as saying he had no interest in becoming prime minister and acting as mediator.
Speculation has been rife that the military might step in to end the impasse, which is beginning to take its toll on Southeast Asia's second-largest economy.
The army has staged or attempted 18 coups in 81 years of on-off democracy, but has kept out of the fray this time.
"Please, my fellow countrymen, please rise up and do our job, which is to stop this wicked government from functioning," Suthep said late on Saturday, urging protesters to target government buildings across the country and prevent civil servants from working.
But there is little sign that the movement is spreading beyond the capital and into the countryside, where Yingluck has her political power base.
She has called an election on Feb. 2, which the main opposition Democrat Party has said it will boycott. Even if it did contest the election, most political analysts say Yingluck's Puea Thai Party would almost certainly win.
Strong rural support has enabled Thaksin or his allies to win every election since 2001.
The protesters accuse Thaksin and his sister of corruption, and want Yingluck to step down to make way for an unelected "people's council" to push through broad political reforms.
The latest demonstrations are the biggest since pro-Thaksin protesters paralysed Bangkok in April and May 2010. That movement ended with a military crackdown and more than 90 people, mostly protesters, were killed.
Pro-government "red shirt" protesters have stayed outside Bangkok this time, limiting the risk of factional clashes.