A measure of calm has returned to the streets of Dili after the violence which erupted again last weekend in the wake of the failed attempt to capture fugitive rebel leader Alfredo Reinado. Some fear this is merely the calm before a bigger storm. And calm is a relative term. In this calm, residents feel relatively safe during the day but still dare not venture outside at night when gangs rule many of the streets of the Timorese capital.

Early in the week a prominent Australian businessman had a narrow escape when his vehicle was set upon by a stone-throwing mob of youths near the Australian embassy compound. As he accelerated away, one of the attackers fired a sharpened steel arrow from an improvised slingshot. The arrow smashed through a window, narrowly missing his head before piercing a column on the side of the windscreen.

The violence is being accompanied by a growing anti-Australian sentiment, so much so that the Australian Government began pulling people out of the country this week after raising the travel warning.

"We strongly advise you not to travel to East Timor at this time because of the volatile security situation and the high risk of violent civil unrest. The situation could deteriorate further without warning. Following recent deaths there is an increasing likelihood that Australians and Australian interests may be specifically targeted," the warning says.

Australians arriving at Darwin airport this week, like Richard Neves, say people are taking extreme precautionary measures in East Timor and are expecting more trouble in coming weeks. The principal of Dili International School, Lyndal Barrett, says the anti-Australian sentiment hit home during the week and she was heading home.

"My local cafe, where I go for pizzas, was stoned [on Monday night] with all East Timorese standing out the front throwing rocks through the doors saying 'Aussies go home, we hate you'," she says. "There have been reports of cars and taxis being pulled over and asked if the occupants are Australian. Just that whole feeling of yes, we hate Australians."

Dili resident Ivo Rangel says the sentiment seems to have grown with the death of two students late last month, shot by Australian soldiers after steel arrows were shot at them. This was compounded by the deaths of five of Reinado's men last weekend during a failed attempt to capture him.

Rangel says he cannot speak for all East Timorese, but he thinks President Xanana Gusmao's orders to crack down on protests have helped reduce the violence, at least for now. He says some people are concerned that police appear to have little control over the gangs that run wild in Dili.

"They were just standing there and watching. I am sure they were probably afraid or scared or they don't have enough police accessories that they can use I don't know. "But in many cases people say the police are just standing and watching," he says.

People see the police cannot stop violence, so they do not trust them, he says, and they feel the local forces, the FFDTL, have more of an impact in stopping the gangs.

American Dili-based aid worker Diane Francisco says it is tough to tell how widespread anti-Australian sentiment is.

"I think in general the people of East Timor are happy to have assistance from the UN and Australian forces to keep law and order and hopefully get things back on track, but they are not the people out demonstrating and throwing rocks," she says.

Deakin University senior lecturer Dr Damien Kingsbury believes most Timorese are still very favourably disposed towards Australians, but people with political agendas are manipulating elements of the community. Political agendas are behind only some of the violence. There are also street and martial arts gangs, with names like Cold Blooded Killers, Provoke me and I'll Smash You and Beaten Black and Blue, and opportunistic violence, like muggings.

East Timor watcher from the ANU Janet Hunt says some of it is based on historical conflicts and underlying tensions in a country heavily traumatised by decades of violence.

East-west tensions were blamed for much of last year's violence, but Kingsbury thinks that divide no longer exists and was always a bit artificial. Francisco agrees, saying she sees people from each coast in gangs now.

One potential flash point is the chase of Reinado. Last weekend's failed raid resulted in the death of five of his supporters and prompted violent protests in Dili that created fear of a repeat of last year's riots in which 37 people died and 150,000 were displaced.

Reinado, who walked out of jail last August, is wanted for leading an attack last May that killed five and left 10 others injured. He has warned that if anything happens to him, "people will violently rise up in their thousands".

Kingsbury, though, does not think Reinado will have much impact on future violence in East Timor. He was unlikely to try to wage a guerrilla war, because he was just protesting against what he perceives as injustices against him and does not have much support, although the Movement for National Unity Justice and Peace or MUNJP which Kingsbury believes was behind last weekend's angry protests might react when Reinado is caught or killed. The nation was on edge again mid- week when former interior minister Rogerio Lobato was jailed for seven and a half years after being found guilty of arming gangs to kill opponents of the Government in last year's riots.

Kingsbury says the sentence likely placated the MUNJP. If there had been anger over it, it would have spilled over by now. The next catalyst could be the presidential elections, a month away. Their fairness is seen as crucial to the nation's long-term stability.

Hunt says she predicted a bumpy 2007 in the lead up to April's presidential elections and the parliamentary poll that comes up to 90 days later. "It will be up and down. I expect outbreaks of violence until after the parliamentary elections," she says.

Blogs from the country this week paint a picture of a country on edge, waiting for something to happen. Squatter at Dili-gence says the violence was having a broader effect.

"Many government departments are not really operating well as local staff are not showing up for work and a number of expats are choosing to leave," Squatter says.

"The Ministry of Education is a bit of a mess and suffering from looting, trashing and a bit of burning. An education ministry warehouse next to the main offices is a smouldering wreck with all contents burnt and the roof caved in." Tumbleweed in Asia, a woman who normally works in Dili, posted this week that it was horribly painful to "watch Timor slide back once again into chaos".

Fat Old Sod, a man aged over 40 writing on Xanana Republic Gazette, talks about the SMS security tree, where people warn each other of trouble hotspots as they emerge so they can be avoided. He tells of a warning last week to avoid the street in front of his home after the local thugs began gathering nearby. He says he would never call the cops himself the one time he did, officers turned up shouting out for who called them while the "perps" stood nearby. "If the locals knew we ever called the police we would be burnt out overnight," he says.

One anonymous resident fears East Timor will eventually fall back into Indonesian hands after several failed UN missions. "In six years of being here I've not seen any improvement, it's moving backwards!! Six years of UN presence has done little or nothing," the person writes.

Kingsbury disagrees. "East Timor is heading in the right direction, albeit from a low base. But that still leaves the country in a fairly parlous state," he says. He says the history of post-colonial states, and East Timor in particular, mean the problems are regrettable, but not that surprising.

Francisco says things are calm now, but no one knows how long that will last. "There are a lot of unknowns and the people are certainly on edge and the events of last weekend were pretty dramatic and put us back on high alert, but the reality is that since the peak on Saturday the violence has been steadily decreasing," she says. "If you spend any length of time in Timor you quickly give up the practice of speculation you are usually wrong. But I think that we are all expecting that there will be periodic flare-ups of violence between now and the elections and immediately following the elections in April. I think that if Reinado is captured or apprehended some time in the next few weeks we'll have incidents surrounding that."

Despite that, she is optimistic East Timor has a positive future. "If you're not optimistic, you shouldn't be here," she says.