The point of the context is that God's name will be glorified by Israel being blessed, and by Jerusalem being blessed. As such, I don't think it is necessary to see God's name in "Jerusalem". What is translated "by" in "by thy name" is actually the two prepositions governing "Jerusalem" and "Israel" - the Hebrew preposition "al". It usually means "on/over", and can have various other meanings. Young translates the clause, "for Thy name is called on Thy city, and on Thy people." The word "on" here may indicate support, as in "relying, supported on" (HALOT on Dan 9:18), or it may simply mean "over" (as in "Thy name is called over thy city and over thy people"). Either way, it denotes a close association between God, Israel His people, and Jerusalem, His chosen city. The point here therefore is the same point Moses makes in Num 14:
Then the Lord said to Moses: “How long will these people reject Me? And how long will they not believe Me, with all the signs which I have performed among them? I will strike them with the pestilence and disinherit them, and I will make of you a nation greater and mightier than they.”
And Moses said to the Lord: “Then the Egyptians will hear it, for by Your might You brought these people up from among them, and they will tell it to the inhabitants of this land. They have heard that You, Lord, are among these people; that You, Lord, are seen face to face and Your cloud stands above them, and You go before them in a pillar of cloud by day and in a pillar of fire by night. Now if You kill these people as one man, then the nations which have heard of Your fame will speak, saying, ‘Because the Lord was not able to bring this people to the land which He swore to give them, therefore He killed them in the wilderness.’ And now, I pray, let the power of my Lord be great, just as You have spoken, saying, ‘The Lord is longsuffering and abundant in mercy, forgiving iniquity and transgression; but He by no means clears the guilty, visiting the iniquity of the fathers on the children to the third and fourth generation.’ Pardon the iniquity of this people, I pray, according to the greatness of Your mercy, just as You have forgiven this people, from Egypt even until now.”