Both Lee and Pettersen produced rounds of 64 to move within striking distance of the leader.
Amy Yang is in 4th position three from the lead.
The leading Australian in 5th position and five from the lead is Katherine Kirk who shares that score with New Zealander Lydia Ko.
Karrie Webb is 25th and Lindsey Wright, after a good start yesterday only just scrapped through to the weekend.
Want video tips delivered straight to your inbox? Subscribe to iseekgolf.com newsletters.