Hi Jade

Sounds like an acquaintance who's blatantly disrespected your feelings. I would say that a natural response to getting that reaction out of you SHOULD BE to back off, and apologise if she knows some history behind it.
And she's, in a way, forgiving you by "relenting" and saying it's OK??!!
Well you're right, you don't need to be forgiven.......even if there wasn't history she would still have potentially been invading your personal space!!!
So........I'd say that it wouldn't at all be unreasonable to set some boundaries. And if you want you can do that quite politely in the sense of telling her that you don't "do" touch and hugging, it's in no way a reflection on her but you just don't feel comfortable with it (if you want you can add "with anyone other than.....family??? OR not!!!).
But if this person still doesn't respect it, then I don't know that she's a person you want as that much of an acquaintance??? So maybe avoid interaction (just a nod and brief "Hello" if you have to) or very brief interactions???

Alison