Hurricane Bill weakened slightly on Thursday but was expected to regain power on a northwest ocean track that will take it between Bermuda, where inhabitants prepared for high winds and heavy seas, and the U.S. East Coast.
Earlier, the first hurricane of the 2009 Atlantic season had eased in strength from a Category 4 to a Category 3, and it was churning over the open sea with winds near 120 miles per hour (195 km per hour).
The U.S. National Hurricane Center said that at 11 a.m. EDT (1500 GMT), the eye of Hurricane Bill was about 695 miles south-southeast of Bermuda.
Bill did not threaten U.S. oil facilities but was forecast to reach Canada's Atlantic Maritime Provinces by Sunday.
The Miami-based hurricane center said Bill was expected to regain Category 4 status in 24-36 hours, as it encountered warmer waters that would boost its power.
The core of Hurricane Bill is expected to pass over open waters between Bermuda and the East Coast of the United States early Saturday, the NHC said.
On Bermuda, a major center for the global insurance industry, authorities issued a hurricane watch and islanders on the 20 square mile (53 sq km) British territory stocked up on emergency supplies.
Bermudian newspapers had reported that U.S. Secretary of State Hillary Clinton and her husband, former President Bill Clinton, were spending a brief private beach vacation on the island. The State Department declined to officially confirm where Clinton was.
The NHC said Hurricane Bill was generating large swells which were pounding the northern Leeward Islands of the Caribbean. In the coming days, swells will start affecting the Bahamas, Bermuda, most of the U.S. East Coast and the Canadian Maritime Provinces, it said.
These swells will likely cause extremely dangerous surf and life-threatening rip currents, the NHC said.
Bermuda residents said swells were already rising on the island's popular South Shore beaches and tropical storm force winds were expected on Saturday.
Bill's closest point of approach to Bermuda was expected to be on Saturday morning when the eye of the hurricane would be passing nearly 200 miles to the west.
Some home supplies stores on the Atlantic island said they had already sold out of bottled water and large flashlights as Bermudians prepared for possible power outages.
Everyone is calm but trade has been brisk. I think everyone is taking heed. People have learned to be prepared, said Eddie Lindo, sales manager of the Masters store.
Bermuda boat owners were securing their vessels and families and friends prepared to sit out the expected stormy weather at home. Some said they would be drinking Bermuda's traditional Dark n' Stormy drink -- rum and ginger beer.
We call them hurricane parties. I think Bermudians figure, since we all have to be cramped up inside, we might as well go through it together! said 26-year-old law student Jennifer Panchaud.