DILI, Oct 5 (Reuters) - A grenade exploded outside a building adjacent to the Australian embassy in East Timor, but no one was hurt, police said on Friday. The blast on Thursday night damaged the building and two cars, said East Timor's police operations commander, Mateus Fernandes. One person was arrested after the incident, he said, declining to provide further details.About 850 Australian troops are in East Timor as part of an international peacekeeping force deployed to restore order following factional bloodshed last year killed 37 people.