The US-based National Hurricane Center (NHC) said the storm was packing winds of up to 105 miles (165 kilometers) per hour as it moved north to the Bahamas, near the top of the category two range on the five-rung Saffir-Simpson wind scale.
That's a slight decrease from earlier, and forecasters predicted the storm would continue to weaken over the next 48 hours. But Sandy will remain a hurricane as it passes over the Bahamas later on Thursday, according to the NHC's 1200 GMT advisory.
The hurricane plowed across Jamaica and Haiti on Wednesday, dumping heavy rains, downing power lines, and forcing hundreds of people to seek emergency shelter.
Jamaican paper, The Gleaner reported a 74-year-old man who was killed when a boulder rolled onto a house, while in Haiti, a woman drowned trying to cross a swollen river in Camp-Perrin and another died in the small town of Coteaux, a regional senator said.
Jamaica's electricity provider said some 70 per cent of its customers were without power due to the high winds and torrential rain, and police had ordered a 48-hour curfew in an effort to deter looters.
Haiti was on "red alert" with all schools closed on Thursday.
Meanwhile, the storm moved away from Cuba Thursday morning, with no immediate reports of serious damage or loss of life there. A local radio station reported many fallen trees and power and telephone outages in eastern Cuba, which felt the brunt of the storm.
Some 1,700 people had been evacuated in the country's Santiago de Cuba province as a precautionary measure.
"We cannot put a single human life in danger. We must evacuate people in areas we know are likely to be flooded, without losing time," local civil defense official Lazaro Esposito told Cuban television.
The hurricane also brought rough weather to the US naval base at Guantanamo Bay, where terror suspects are held.
The Pentagon said a preliminary hearing at Guantanamo involving the alleged Al Qaeda mastermind of the USS Cole bombing in 2000 was delayed until Thursday due to the storm.
The Atlantic hurricane season runs from June 1 to November 30.