"The government relaxed the curfew from 5am to 1pm on Saturday to allow the residents of Kathmandu and Lalitpur (on the southern outskirts of Kathmandu) to buy necessary provisions," the Home Ministry announcement said.

Witnesses in the capital said that residents rushed to local markets and pharmacies to buy food and medicine.

The curfew came into place after thousands of people rampaged through the capital setting fire to the city's main mosque and several Arab businesses and ransacking employment agencies.

Police opened fire to disperse an angry crowd that tried to storm the Egyptian embassy, which represents Iraqi interests in the Himalayan kingdom after 12 Nepalese youths were killed by captors who had held them hostage since 19 August.

Two people were killed in the unrest, a Home Ministry official said.

The hardest hit by the curfew have been wage earners such as rickshaw pullers, porters and others who have been banned from operating their vehicles and carrying loads.

With 86% of its population Hindu, Nepal is the world's only official Hindu state. Muslims account for about 4% of the 27 million population.