Residents of the Cayman Islands braced for Hurricane Paloma on Friday as it strengthened rapidly while bearing down on the wealthy British territory and took a path that could also threaten Cuba.

'No one thought this storm would come in so quickly,' said Levonne Johnston,' a resident of George Town, the Cayman Islands capital, which was expected to take a lashing from the eighth hurricane of the 2008 Atlantic storm season.

'We are just doing whatever we can with the couple of hours we have left and then knuckle down and wait out the storm,' Johnston said.

Paloma doused Honduras with heavy rains on Thursday, adding to misery in the impoverished Central American country where the UN estimates 70,000 people have been made homeless by recent storms.

It posed no threat to US oil installations in the Gulf of Mexico on its passage northward but U.S. forecasters said it was strengthening on Friday and could become a 'major' hurricane with maximum sustained winds of at least 111 miles per hour (178 kph) by Saturday.

At 10am EST (1500GMT), Paloma was 75 miles (120 km) south-southwest of Grand Cayman and moving north at 7 mph (11 km), the US National Hurricane Center said.

Its top sustained winds increased to nearly 85 mph (140 kph), making Paloma a Category 1 hurricane on the five-step Saffir-Simpson intensity scale, the Miami-based center said.

Rainfall totaling up to 12 inches (30 cm) was expected over parts of the Cayman Islands and its national weather service forecast waves rising up to 30 feet (9 metres) off the islands, triggering potentially dangerous coastal storm surges.

It said the storm was likely to become a Category 2 hurricane later on Friday, before possibly growing into a fearsome Category 3.

Hurricane Katrina was a Category 3 storm when it came ashore near New Orleans in 2005 and swamped the vulnerable, low-lying city.

'The center of Paloma will pass near the Cayman Islands late today or early Saturday and be approaching the coast of central Cuba late Saturday,' the hurricane center said.

All government offices were closed and the storm forced the postponement of a national festival known as Pirates Week, a major tourist draw. Many tourists already had cut short their vacations in order to evacuate.

'We're going to Cancun where it's sunny,' said Steve Keith, a visitor who was married in Grand Cayman on Thursday night and had intended to spend his honeymoon there.

Paloma came in the last month of what experts correctly predicted would be a busier than normal storm season.

It was expected to hit Cuba after its brush with the Cayman Islands, though possibly as a weakening hurricane.

The communist-ruled island still is dealing with devastating effects from two powerful hurricanes that caused more than $5 billion in damage two months ago.

The Atlantic hurricane season runs from June 1 to November 30.-Reuters