CHICAGO, July 29 (Reuters) - Chicago Mercantile Exchange lumber futures closed lower on Wednesday amid profit taking that developed after two days of steep gains that lifted prices over 10 percent, traders said.
The recent surge in futures values following growing mill curtailments, a rise in the Canadian dollar, an improved housing market and forest fires cutting production in British Columbia may have run its course, traders said.
* September lumber closed off $4.00 per thousand board feet at $203.00 and November was off $2.30 at $207.30. September posted a new three-week high early before prices retreated.
* Cash market rose sharply this week, but now that orders are being filled demand seems to be slowing, traders said.
* Futures advanced sharply this week starting with the announcement from West Fraser Timber Co Ltd on Monday that it plans to curtail lumber production at three of its B.C. sawmills for two weeks.
* Those additional curtailments added to recent support from the rising Canadian dollar and a jump in the number and size of forest fires in British Columbia.
* A rising Canadian dollar continues to pressure Canadian producers as the higher currency slows exports.
* Canadian dollar rose to a nine-month high on Monday before encountering some resistance the past two days.
* But cash prices are up and housing in the U.S. showing some improvement limited any downside in futures.
* Random Lengths on Wednesday quoted cash spruce at $196 per tbf, up $18 from Friday and up $24 from last week.
* "Inquiries intensified Tuesday, driven in part by curtailment news in Western S-P-F," Random Lengths said.
* "Concerns about reduced mill offerings boosted demand for Coast and Inland species as well. A heat wave, which left loggers locked out of the woods in parts of the Northwest, exacerbated those concerns," they said.
* "Wholesalers and distributors covered any shorts they held and addressed near term inventory needs, but remained cautious with any moves to the long side of the market," the reporting agency added.

(Reporting by Jerry Bieszk; editing by Jim Marshall)

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