* Canadian dollar at C$1.3456, or 74.32 U.S. cents
* Bond prices higher across a flatter yield curve
* Gap between 2 and 10 year yields hits narrowest in 6 months
TORONTO, May 26 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Friday as prices of oil, one of Canada's major exports, stabilized after a sharp drop the day before.
U.S. crude CLc1 prices were up 0.22 percent at $49.01 a barrel.
Oil prices had plunged on Thursday following an Organization of the Petroleum Exporting Countries-led decision to extend current production curbs that investors gauged did not go far enough to reduce a global supply glut. O/R
Gains for the loonie came even as the U.S. dollar .DXY climbed against a basket of major currencies. Data showed that U.S. economic growth slowed less sharply in the first quarter than initially thought. 9:27 a.m. ET (1327 GMT), the Canadian dollar CAD=D4 was trading at C$1.3456 to the greenback, or 74.32 U.S. cents, up 0.2 percent.
The currency traded in a range of C$1.3433 to C$1.3497.
On Thursday, the loonie touched its strongest intraday level in five weeks at C$1.3388 after the Bank of Canada on Wednesday sketched a rosier economic view than investors had expected in its statement announcing no change in its 0.5 percent benchmark interest rate.
Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 1.5 Canadian cents to yield 0.711 percent and the 10-year CA10YT=RR rising 23 Canadian cents to yield 1.437 percent.
The gap between the 2-year and 10-year yields narrowed by 1.8 basis points to a spread of 72.6 basis points, its narrowest since Nov. 8. Shorter-dated Canadian bonds have increasingly underperformed longer-dated maturities since Wednesday's rate decision by the Bank of Canada.