* USD/INR ends at 54.30/31 vs 54.1750/1850 on Tuesday
* Large petrochem co sells dollars in early session - dealers
* USD/INR finds major support at 54.02
By Subhadip Sircar
MUMBAI, March 13 The Indian rupee fell on Wednesday after earlier hitting a two-week high as caution ahead of inflation data hit domestic shares while state-run banks were spotted buying dollars, which traders attributed to government purchase needs.
India is due to release wholesale price inflation data on Thursday, with analysts expecting a 6.54 percent rise in February, the slowest annual pace in more than three years.
Data at that level or below would significantly boost the chances the central bank would cut interest rates on March 19, after data earlier this week showing stronger-than-expected industrial output and accelerating consumer inflation appeared to cloud the picture.
"The downside in equities and euro as well as local oil demand hurt the rupee. The inflation data will be key and a lower number will be positive for the rupee," said Uday Bhatt, a forex dealer at UCO Bank.
The partially convertible rupee closed at 54.30/31 per dollar versus its previous close of 54.175/185. The local unit rose to as high as 54.02 during the session, a level last seen on Feb. 28.
The rupee's gains earlier in the session were driven by dollar selling by a large petrochemical company, said dealers.
However, the currency ran into a key resistance at 54.02, the 50 percent Fibonacci retracement on the rise from Feb. 6 level of 52.87 to March 4 level of 55.15.
The rupee erased its gains as domestic shares fell ahead of Thursday's WPI data, with the benchmark BSE index ending down 1 percent, in its biggest one-day percentage fall this month.
Dollar buying by state-run banks put further pressure on the rupee, according to dealers.
In the offshore non-deliverable forwards, the one-month contract was at 54.72, while the three-month was at 55.35.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 54.49 with a total traded volume of $5.1 billion. (Editing by Subhranshu Sahu)