Hm, that does seem rather odd. I don't know how I'd respond to that--I really can't imagine my T (also male--I'm female) suggesting it, but he also doesn't allow any physical contact beyond handshakes (like no hugs or anything). So I'm not sure how I'd react--probably be kind of stunned, honestly.
Has he ever suggested something like that before? I know you said you hug at times, but has he suggested other sorts of touch in the past? I'd maybe try asking him about it next session, at least to clarify what he thought would be helpful about it.