(Yicai) Oct. 19 -- The Chinese yuan rallied against the US dollar today after China’s economy expanded at a better-than-expected rate in the third quarter, prompting analysts to raise their full year forecast.

The central parity rate of the yuan against the greenback strengthened by 1 basis point today from yesterday to 7.1795, according to data on the China Foreign Exchange Trade System.

The onshore yuan appreciated by 9 basis points to 7.3160 against the greenback as of 12.40 p.m. China time, while the offshore yuan also gained 9 basis points to 7.3286.

China’s gross domestic product expanded 4.9 percent in the three months ended Sept. 30 from a year earlier, according to data released by the National Bureau of Statistics yesterday. This is higher than the average forecast of 4.47 percent by a Yicai poll of chief economists.

And total retail sales of consumer goods climbed 5.5 percent in September, also more than the chief economists’ average forecast of 4.7 percent.

Depreciation pressure on the yuan has eased somewhat after the release of the third-quarter GDP report, Zhou Hao, chief economist at Guotai Junan International, told Yicai.

Long position holders of the US dollar are still going long amid a strong US dollar and high US bond yields, but short-sellers of the redback are now starting to wait and see, traders told Yicai.

The offshore yuan should remain within the range of 7.25 and 7.35 against the dollar, said Zhang Meng, macro and foreign exchange strategist at Barclays. And if the central bank takes more steps to boost the economy, the yuan could continue to strengthen.

The key economic indicators indicate that China’s economy is showing signs of stabilization, Lu Ting, chief China economist at Japanese investment bank Nomura told Yicai.

On the back of this data, Nomura raised its prediction for China’s economic growth this year to 5.1 percent from 4.8 percent, while German lender Deutsche bank lifted its forecast for the fourth quarter to 5.3 percent from 5 percent and the annual forecast to 5.2 percent from 5.1 percent.

The government may still need to take additional measures in the coming months to boost real estate demand and prevent price deflation, but more stimulus in the short term is not so urgent, Frankfurt-based Deutsche Bank said.

It is too early to say if the economy has stopped contracting, and China still needs more supportive policies, said Lu. Demand for travel and gatherings dropped after the National Day holiday earlier this month, the real estate sector remains sluggish, market confidence still needs a boost and high interest rates in developed markets may eventually impact the global economy, he added.

Editor: Kim Taylor