At 1200 GMT, Arthur was 240 kilometres southwest of Cape Fear, North Carolina, packing maximum sustained winds of 130 kilometres per hour, the National Hurricane Centre said.
The Miami-based weather centre said Arthur is expected to approach the Outer Banks resort region of North Carolina late today, laying waste to many Americans' vacation plans for the Independence Day holiday.
News reports said that in the coastal Carolinas alone, as many as half a million visitors had been expected for the national holiday, the region's biggest tourist weekend.
Arthur was moving northward at 15 kilometres per hour and was expected to pick up speed.
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A storm surge of up to 1.2 metres was possible in North Carolina's Outer Banks.
Through tomorrow, rainfall of up to six inches was expected in coastal areas of North Carolina.
The storm is the first of the Atlantic hurricane season, which started on June 1 and runs through November 30.