The word "fiancée" needs a personal pronoun in front of it (my/his/whoever's). "A fiancée" just sounds plain wrong.
I think, according to the Duolingo rules this sentence may be better as the default solution: "THAT is not a fiancée, but a friend!". Or even better: "THAT is not MY fiancée, but MY friend!". Or the Czech original: "TOTO není snoubenka, ale kamarádka" .
There are sveral other sentences like this in the course. THAT is of course accepted. In this special case it would be akward require to require the sctrict division between those two groups.
I did not mean to require the strict division between those two groups, only to change the default translation. This default translation may lead to confusion for students. The final decision is up to you, of course.