Lee race to the lead with an outward nine of 33 but the momentum slowed over the closing nine a bogey at the last costing her a share of the halfway lead.
American Lizette Salas and first-round leader Eun-Hee Ji are tied with Lee in the share of 2nd position while two time winner Amy Yang of Korea and Americans, Amy Olson Austin Ernst are another shot back.
Lee, who began the season with two performances below her best in Australian events, is back in the sort of form that saw her finish runner-up on the 2018 LPGA Tour money list behind only Ariya Jutanugarn.
Katherine Kirk is the next best placed of the Australians in a share of 9th and four from the lead while Sarah Jane Smith and Su Oh are well back in 62nd position.
Pre-tournament favourite and world number one, Ariya Jutanugarn, is at 4 under and seven shots from the lead heading into the final 36 holes.
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