The United States said on Monday its relationship with Thailand was going through a "challenging" period as the two sides began a major military exercise, scaled down over Washington's concerns about the junta leadership.

Cobra Gold, the largest military exercise in the Asia-Pacific, has been held annually in Thailand for more than three decades, but the US scaled it back this year after sanctioning Bangkok for last year's coup.

"We can't deny that this period is a challenging one and has necessitated a modified Cobra Gold as Thailand manages its return to democracy," said Patrick Murphy, US charge d'affaires, in a speech at the opening ceremony for Cobra Gold at a military academy in Nakhon Nayok.