NASSAU, Bahamas - Powerful Hurricane Irene destroyed hundreds of homes on small Bahamian islands but largely spared the capital Nassau on Thursday as it tore over the sprawling archipelago on its way toward the U.S. East Coast.

There were no immediate reports of deaths in the Bahamas from the Category 3 hurricane, but some small settlements reported up to 90 per cent of their homes damaged while assessments from other islands were not in because telephone lines were down.

Authorities and residents were clearly pleased that Irene had shifted course and largely skirted populous New Providence island, which is home to more than 200,000 people and some of the most famous resorts in the Bahamas. Irene left a mess of scattered debris, toppled trees and minor flooding but no major damage.

"For the last three or four major hurricanes that I can recall, we've managed to skirt the eye of the hurricane," said Charlton Knowles, who runs a pizza restaurant in Nassau. "If the only things we are having are downed trees and pickets fences, then it's just a severe storm and that's all."

Downtown Nassau with its colorful limestone buildings was largely unscathed, but the Straw Market, a well-known shopping spot for tourists, did not survive. The canvas roof was torn and the metal frame was damaged, leaving about 600 craft stalls exposed to the wind and rain.

Merchant Larry McDonald, a wood carver, had thought to pack away his merchandise, but others did not and their goods were soaked from the rain. He said the market would not be able to operate.

"How are we going to open? Ain't nobody going to come here to buy stuff. Might be for weeks, might be for months," he said.

Nassau residents expressed concern about fellow Bahamians on Eleuthera and other islands.

About 90 per cent of the homes in two settlements known as Lovely Bay and Chesters on Acklins Islands were destroyed and no longer habitable, said Gayle Outten-Moncur, the operating officer of the Emergency Management Agency in the Bahamas. A total of about 100 homes were damaged, she said.

On the island of Mayaguana, where roughly 250 people live, about 40 homes were damaged, she said.

There are also reports of extensive damage on Cat Island, Long Island and Eleuthera, but authorities had not been able to complete full assessments and conditions were still dangerous Thursday.

Irene was only the third storm since 1866 to cross the entire length of the island chain.

The U.S. National Hurricane Center in Miami, Florida, said it was expected to dump from 6 to 12 inches (15 to 30 centimetres) of rain on the islands.

Irene's core was forecast to continue moving over the northwestern Bahamas on Thursday before heading north toward the United States, where it sent thousands of vacationers fleeing and threatened up to 65 million people from the Carolinas to New England. It would be the strongest to strike the East Coast in seven years.

Hurricane watches were issued from North Carolina to New Jersey. Irene's projected path had it bringing misery to Washington, New York and Boston.

The former chief of the National Hurricane Center called it one of his three worst possible situations.

"One of my greatest nightmares was having a major hurricane go up the whole Northeast Coast," Max Mayfield, the centre's retired director, told The Associated Press.

He said the damage will probably climb into billions of dollars: "This is going to have an impact on the United States economy."

It is a massive storm, with tropical-force winds extending almost twice as far as normal, about the same size as Katrina, which devastated New Orleans in 2005.

"It's not going to be a Katrina, but it's serious," said MIT meteorology professor Kerry Emanuel. "People have to take it seriously."

Irene was expected to come ashore Saturday in North Carolina with 115 mph (185 kph) winds and could dump a foot of rain.

Hurricanes are rare in the U.S. Northeast because the region's cooler seas tend to weaken storms as they approach, and they have to take a narrow track to strike New York without first hitting other parts of the coast and weakening there.

Officials in Ocean City, Maryland, ordered thousands of residents and tourists to abandon the beach community. In North Carolina, three coastal counties issued evacuation orders covering more than 200,000 people, including tourists and full-time residents. President Barack Obama declared an emergency for the state, allowing for federal help.

Dania Armstrong of New York sat outside a motel smoking a cigarette while she waited for her family to get ready. Armstrong, her daughter and grandchildren had already been ordered off the North Carolina island of Ocracoke and planned to leave the town of Buxton soon.

"I've been coming down here for 50 years," she said. "I know what's coming. It's time to leave. You don't want to be here when it hits."

The U.S. Navy ordered ships to sea so they could endure the punishing wind and waves in open water.

In Washington, where residents were rattled by a rare earthquake Tuesday, officials warned people to be prepared for stormy conditions regardless of Irene's exact path and to stay away from the beaches in the region.

New York is especially susceptible with its large subway network and the waterways around the city, Mayfield said.

"In many ways, a Category 2 or stronger storm hitting New York is a lot of people's nightmare," said Susan Cutter, director of the Hazards and Vulnerability Research Institute at the University of South Carolina.

By Thursday evening, Irene was packing winds of 115 mph (185 kph) and was centred about 530 miles (855 kilometres) south-southwest of Cape Hatteras, North Carolina, the U.S. hurricane centre said. It was travelling north-northwest at 14 mph (22 kph). Center forecasters said strengthening of Irene was possible later Thursday and Friday.

Puerto Rico, which also was hit by Irene, was struggling with heavy flooding and landslides. On Tuesday, a 62-year-old woman died after trying to cross a swollen river in her car near San Juan, police said.

In the Dominican Republic, flooding, rising rivers and mudslides prompted the government to evacuate nearly 38,000 people. Authorities said a 40-year-old man was killed when floodwaters destroyed his home in Cambita, just west of Santo Domingo, and a 42-year-old Haitian migrant drowned in a surging river near the city of El Seibo. An 18-year-old woman also died after being swept away by a river in the province of San Cristobal.

In neighbouring Haiti, Irene's outer bands killed two girls in the northern coastal city of Port-de-Paix, triggered landslides and flooded cultivated fields earlier this week, according to the U.N. Office for the Coordination for Humanitarian Affairs.