Lee sank a 25-foot eagle at the par-5 15th and followed up with a birdie from a similar distance at the next to take a one-stroke lead over Japan's Mamiko Higa.

"I holed quite a lot of putts from far away," Lee said.

The 22-year-old has four LPGA titles and is coming off second place at the Ladies Scottish Open on Sunday.

The West Australian said her performance had given her the confidence to believe she can win a first major championship.

"I know I can play around a links course and handle those conditions so I'm in a good place," Lee said.

"I did hole quite a lot of putts from just inside 30 feet today.

"I don't think I holed any that were really short. I've been hitting it pretty solid and really happy with where I am right now."

A win on Sunday would make her only the third Australian woman to claim a major championship, after Karrie Webb (seven) and Jan Stephenson (three).

RIGHT: Michelle Wie was forced to withdraw after 12 holes due to an ongoing hand/wrist injury. PHOTO: Richard Heathcote/Getty Images.

Japan Mamiko Higa was a shot behind Lee, while five players – Georgia Hall, Teresa Lu, Sung Hyun Park, Mi Hyang Lee and Pornanong Phatlum – were a further stroke adrift.

Higa, fourth on this year's Japan LPGA money list, would join an even more exclusive club.

Only one player from her nation has captured a major, Chako Higuchi at the 1977 Women's PGA Championship.

Meanwhile, World No.1 Ariya Jutanugarn of Thailand eased into her week with a 71 that included a double-bogey.

Michelle Wie withdrew after 12 holes, citing an ongoing hand/wrist injury. Wie was eight-over at the time.

"I have been doing everything humanly possible (besides giving it proper rest) this past couple of weeks to get my hand healthy enough to play this event," she said on social media.

"Unfortunately, it wasn't enough.

"I gave it my all today but I just couldn't handle the pain any longer. I'm devastated that I had to withdraw mid-round, but I felt that if I kept pushing through the pain, I would have injured my hand further."