Maybe the easiest thing is just to say that to your friend and let him/her tell your other friend that you are not looking for relationship at this point or whatever before this person asks you out. Doesn't have to tell her that you know about it. Just make them casually say it without mentioning that you know. Its maybe easiest and least awkward because then she doesn't know you know while she didn't get denied since she didn't even ask to begin with. Its win-win if it works. Not that long lasting solution though.
Or just be honest and say how you feel. Its risky, but friendships are all about honesty and understanding each other.
just my take