(Adds strategist comments and details throughout; updates
prices)

* Canadian dollar falls 0.2% against greenback

* Loonie touches its strongest intraday since Sept. 21 at
1.3242

* Canada’s exports, imports both fall in August

* Canadian bond yields ease across a flatter curve

By Fergal Smith

TORONTO, Oct 6 (Reuters) – The Canadian dollar weakened
against the greenback on Tuesday as investor hopes for U.S.
stimulus receded and data showed a slowdown in Canada’s
merchandise trade, with the loonie pulling back from an earlier
two-week high despite climbing oil prices.

U.S. stocks fell sharply after President Donald Trump said
he was calling off negotiations with Democratic lawmakers on
coronavirus relief legislation until after the November
election.

Canada sends about 75% of its exports to the United States,
including oil. U.S. crude oil futures settled 3.7% higher
at $40.67 a barrel, supported by U.S. supply disruptions caused
by an approaching hurricane in the Gulf of Mexico.

“Something that has been evident in the last month or so is
that the path of least resistance for USD-CAD has been higher,”
said Simon Harvey, FX market analyst for Monex Europe and Monex
Canada.

“This has continued in today’s session, evidenced by the
loonie following the broad G10 move lower against the (U.S.)
dollar on a day where WTI rallies back above $40,” Harvey said.

The Canadian dollar was trading 0.2% lower at 1.3290
to the greenback, or 75.24 U.S. cents. It touched its strongest
level since Sept. 21 at 1.3242 before turning lower.

Since the beginning of September, the loonie has fallen
nearly 2%.

Canada’s exports and imports both fell in August, hinting
that the momentum of the recovery from the COVID-19 crisis could
have slowed more than anticipated, data from Statistics Canada
showed.

Separate data showed that home sales in the area

By Robert Hughes

Personal income fell 2.7 percent in August, according to data from the Bureau of Economic Analysis. Personal income data over the past six months have been sharply distorted by lockdown policies which caused massive layoffs, and government stimulus programs that sent transfer payments skyrocketing. As those payments fade, measures of personal income and components are returning to trend.

Disposable personal income fell 3.2 percent after a 0.3 percent increase in July. The personal savings rate fell in August, coming in at 14.1 percent of disposable income following rates down from 17.7 percent in July and a peak of 33.6 percent in April (see first chart).

The drop in personal income consisted, in part, of a 1.3 percent increase in wages and salaries. Wages and salaries, which typically account for about half of personal income, rose as some employees went back to work after lockdown policies were eased. However, wages and salaries are still down 3.9 percent since February (see second chart). Supplements to wages and salaries (primarily employer contributions to pension and insurance funds and government social-insurance programs) which typically account for another 12 percent of personal income also posted a gain, rising 0.8 percent in August but are still down 2.1 percent from February.

Proprietors’ income jumped 2.7 percent for the month following a 1.2 percent rise in July while income on assets (interest and dividends) rose 0.2 percent in the latest month. Since February, these two components are still off 5.7 percent and 3.4 percent, respectively (see second chart).

Personal transfer payments fell 14.8 percent in August, the fourth consecutive decline after a massive 100.5 percent gain in April. Personal tax payments rose 1.3 percent in August, leaving disposable income with a drop of 3.2 percent. Since February, transfer payments are still up 29.9 percent