I don't know if this helps, but my long term psychodynamic T did not hug for the longest time. It turns out that he wanted me to talk about it first, explore what it means. After a long time taking about it he said that if we talked about it first and i asked for the hug then in some circumstances it would be ok. I ended up occasionally getting hugs from him if I met those requirements.
Are there any circumstances in which your T would be ok with hugs? Can you ask her that?
Hugs are not necessarily inappropriate.
Early on I had a T who said something similar to your T. No touching or hugs turned out to be a deal breaker for me. If it is a deal breaker for you it's ok to look for other therapists. It's even ok to tell current T that it may be a deal breaker to you and see if she can refer you.