Nepali police shot dead two men today after crowds attacked a mosque in Kathmandu and charged through the streets chanting "Down with Islam" to protest against the killing of 12 Nepalis in Iraq.
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Protesters stormed inside the city's main mosque, set furniture and carpets on fire and tore up a copy of the Koran, before police drove them out.
Authorities clamped an indefinite curfew on the capital and later fired on a group who gathered in downtown Kathmandu despite the ban, killing one man, an official said.
Another man was killed and three wounded when police fired to break a mob trying to storm the Egyptian Embassy in Kathmandu before the curfew was imposed, the interior ministry said.
Calm gradually returned after the curfew took effect in the afternoon and most of the capital's streets emptied.
King Gyanendra urged people of different faiths to stay calm in the Hindu nation already torn by a Maoist revolt. "We must ensure this tragic incident does not weaken the age-old fraternal ties, unity and mutual tolerance that exists among the Nepalese people," the royal palace said in a statement.
A militant Iraqi group said yesterday it had killed the 12 Nepali hostages, who went to Iraq to work as cooks and cleaners for a Jordanian firm. It showed pictures of one being beheaded and the others with bullet wounds to the head and back.
Earlier, crowds of people burst into the offices of Saudi Arabian Airlines and Qatar Airways, smashing windows and taking papers and furniture on to the street to burn.
Police lobbed teargas shells and fired water cannon at about 3,000 demonstrators burning tyres at a main intersection near the Jama Masjid mosque in the heart of the city.
Protesters shouted "Down with Islam", "Long live the memories of the 12 Nepalis", and called for the government to resign for doing too little to protect the victims.
There is no history of significant anti-Muslim protests or riots in Nepal, which is overwhelmingly Hindu but has a small Muslim minority. But there have been widespread and sustained anti-government protests this year.
About 3.5 per cent of Nepal's 27 million people are Muslim.
Nepal does not allow its nationals to travel or work in Iraq because of security concerns but many go to the country from other nations in the Middle East, where about 200,000 Nepalis work as labourers, drivers, guards, cleaners and cooks.
The roughly 800,000 Nepalis working abroad send about $800 million home to their families a year, a major income source in one of the world's ten poorest countries.