* Crown gives back most gains after initial surge
* Euro holds gains against dollar as U.S. tax cut in focus
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Dec 20 (Reuters) - Sweden's crown rose half a percent on Wednesday, falling back from an initial surge after the Riksbank signalled as before that it expected to hike rates in 2018 but maintained its tightening of its ultra-loose monetary policy would be gradual.
The crown had initially jumped almost one percent against the euro. The central bank kept its benchmark rate unchanged at -0.50 percent and said it would reinvest coupons and cash from maturing bonds, including bringing forward some reinvestments into 2018.
BNP Paribas's Global Head of FX Strategy Michael Sneyd said the announcement amounted to a "very gradual form of tapering" and a slightly more dovish tone than the market had expected.
"They are effectively continuing to expand their balance sheet for at least the first half of 2018," he said, adding that he was bullish on the crown into next year.
The Riksbank has been reluctant to tighten policy despite inflation being above or close to the 2 percent target for most of the year, putting it out of step with other central banks, many of which have turned more as other banks have turned more hawkish, even as inflation has risen and the Scandinavian economy remained strong.
The crown was up 0.46 percent at 9.9080 crowns per euro, having initially risen to 9.8595 crowns per euro after the statement, its strongest since Dec. 12.
Currency markets elsewhere were quiet in thin trading ahead of the holiday season.
The euro held on to small gains on Wednesday with analysts saying that expectations of the Trump administration's landmark U.S. tax overhaul were largely priced into the dollar.
Year-end portfolio moves and a rise in German bond yields also helped keep the euro broadly unchanged at 1.184 against the greenback. The euro was up 0.3 percent against the Japanese yen at 134.
The dollar last stood at 113.13 yen, up 0.2 percent on the day, having pulled away from Friday's low of 112.035, with last week's high of 113.75 seen as its next target.
Gains in the dollar were limited as many market players looked to the Bank of Japan's two-day policy meeting ending on Thursday for clues to whether the BOJ will join the U.S. Federal Reserve and European central banks in winding back stimulus.
A speech by BOJ Governor Haruhiko Kuroda in November sparked speculation of a stimulus taper when he mentioned the concept of a 'reversal rate' - a level at which low interest rates start to have more harmful side-effects than benefits.
"There is very strong interest in the 'reversal rate'. Kuroda's news conference (when the BOJ meeting ends) will be pretty much all about just that," said Yukio Ishizuki, senior strategist at Daiwa Securities.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Tommy Wilkes; Additional reporting by Hideyuki Sano in TOKYO and Masayuki Kitano in SINGAPORE; Editing by Raissa Kasolowsky)