SHANGHAI: The yuan strengthened against the dollar on Wednesday, after China released better-than-expected economic data, suggesting the economy is stabilising and boosting investor confidence.

China’s gross domestic product (GDP) grew 4.9% in July-September from the year earlier, beating the Reuters poll estimate of 4.4%, potentially giving enough momentum for the economy to hit Beijing’s full-year growth target.

Meanwhile, industrial production and retail sales data both rose in September and beat investor expectations.

Having opened at opened at 7.3132 per dollar, spot yuan strengthened as much as 0.35% to 7.2905 per dollar after the data release, before giving up some gains.

Prior to the market’s opening, the People’s Bank of China (PBoC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1795 per US dollar, almost flat against the previous fix of 7.1796.

The offshore yuan was trading at 7.3074 per dollar.

The better-than-expected data shows that stimulus measures were helping the economy’s recovery, and more policy support was likely as authorities seek to meet the 5% GDP growth target, UBS analysts said.

The Chinese currency has lost about 5.5% against the dollar so far this year, pressured by a firming US dollar, a weak economy, and a widening yield gap between China and the United States.

Yuan steady as traders await GDP data

“The PBoC continues defending FX weakness either via lower fixing rates, tighter funding, or outright spot intervention. I expect it to continue finding ways to stimulate and support the economy, even if data confirms a bottom is in,” said Kunal Murdia, Asia emerging markets trader at Citi.

The global dollar index fell to 106.18 from the previous close of 106.25.