Brownsville, TX - After Hurricane Dolly unleashed a fury of damaging winds and wicked rain on the US-Mexico coastline and diminished to a tropical storm, widespread flooding along the populous Rio Grande Valley became the top concern on Thursday.

Dolly, the first hurricane of the 2008 Atlantic storm season to make landfall, dumped up to 12 inches of rain in the first few hours after coming ashore at the barrier island of South Padre Island, where it ripped off roofs, snapped trees and left about 155,000 residents without power across the region.

©REUTERS/Tomas Bravo
A woman shields her baby from the rain after evacuating from a flooded neighbourhood in Matamoros July 23, 2008.

Residents emerged from their homes and shelters to walk through streets littered with debris, toppled street lights and downed power poles.

"Everything is gone. Everything got wet," said Amber Acevado, who runs a flooring store on South Padre Island. "You stand here inside the store, you can see right through to the outside."

Dolly was downgraded to a tropical storm late on Wednesday and remained at that strength early on Thursday as it moved inland, dumping enormous amounts of rain on South Texas and northeast Mexico and with sustained winds of 50 mph (80 kmh). It will likely weaken further to a tropical depression later on Thursday.

Even in its diminished state, Dolly was a menace.

The U.S. National Hurricane Center in Miami said Dolly could produce total rainfall accumulation of up to 12 inches and up to 20 inches in some places.

"These rains are very likely to cause widespread flooding," the center said in a report issued at 8 a.m. EDT.

The full effect of the flooding might not be seen for days as rain dumped by Dolly's inland march flows into the Rio Grande Valley, home to more than 1 million people.

"The main hazard from this storm is probably going to be inland flooding," said John Nielsen-Gammon, official climatologist for the state and a professor at Texas A&M University.

The storm missed most offshore drilling rigs and production platforms in the Gulf of Mexico.

U.S. crude oil prices rose earlier this week on worries of possible storm damage to offshore drilling rigs. But oil prices fell after the storm barely dented supplies, and hit a 7-week low of $123.62 a barrel on Thursday.

The prospect of heavy rains and a storm surge of sea water pushing back upstream spurred concern that levees holding back the Rio Grande could be breached, causing widespread flooding.

Pat Ahumada, mayor of Brownsville, said he expected the levees to hold.

Texas Gov. Rick Perry has put 1,200 National Guard troops on alert and issued a disaster declaration for 14 low-lying counties. Perry has asked President George W. Bush to declare a federal disaster for the storm-damaged area.

Mexico's navy on Wednesday recovered the body of a fisherman who had gone missing off the Yucatan Peninsula as the storm passed through.

The only reported injury from the storm so far was a 17-year-old boy who was seriously injured when he fell seven stories from a condominium balcony in South Padre Island.