U.S. forecasters have downgraded Earl to a category two hurricane, but expect it to remain a powerful storm as it closes in on the U.S. east coast.

The National Hurricane Center said in its latest report Thursday that Earl was 260 kilometers south of Cape Hatteras, North Carolina, with maximum winds of 165 kilometers per hour.

The eye (center) of the storm is not expected to make landfall, but Earl is on course to lash the North Carolina coast late Thursday before heading north.  Tens of thousands of people have been evacuated from North Carolina's barrier islands.

Hurricane and tropical storm warnings and watches are in effect along the mid-Atlantic coast and as far north as Maine.  The governors of North Carolina, Virginia, Maryland and Massachusetts have declared states of emergency.

U.S. President Barack Obama also declared a state of emergency in North Carolina, allowing the federal government to coordinate disaster relief efforts there.

Forecasters have warned of heavy rains, damaging winds and a dangerous storm surge that could raise water levels along the coast as much as 1.5 meters.

Earl already has skirted parts of the eastern Caribbean, flooding areas of Antigua and ripping out trees and blowing down power lines on St. Martin.  Officials in the U.S. Virgin Islands and Puerto Rico have said they are working to restore electricity to more than 200,000 people.

Forecasters are also watching Tropical Storm Fiona, which is expected to pass near Bermuda early Saturday.  

Some information for this report was provided by AP and Reuters.