Credit rating agency Standard & Poor's has upgraded its credit outlook for the US government to "stable" from "negative," reducing the threat of a further downgrade to the country's sovereign rating.

S&P said the chances of a ratings downgrade is now "less than one in three" as improvements in tax receipts and economic performance are helping to bring down the country's debt levels.

The dollar rallied against the euro and yen. Investors sold safe-haven US government debt, boosting the 30-year treasury bond's yield briefly to a 14-month high.

In its release, S&P said recent increases in tax receipts and steps taken to address longer-term budget issues had improved the US outlook.

The agency raised concerns, however, about the ability of policymakers to tackle long-standing issues due to a deepening of the partisan divide in Washington in the last decade.

"We believe that our current 'AA+' rating already factors in a lesser ability of US elected officials to react swiftly and effectively to public finance pressures over the longer term in comparison with officials of some more highly rated sovereigns and we expect repeated divisive debates over raising the debt ceiling," the agency said in a statement.

S&P said it expects the US debt-to-GDP ratio stabilising around 84 per cent over the next few years, which would allow "policymakers some additional time to take steps to address pent-up age-related spending pressures."

"The strong stock market has created tax revenues, which is positive, and the economy continues a slow but steady growth path, so while we continue to print money, the overall debt numbers have stabilised and I think that's what the S&P is reflecting," said Tim Ghriskey, chief investment officer at Solaris Group in New York. Rival agencies Moody's and Fitch both currently hold triple-A ratings on the US.-Reuters