Stephanie Na (71) are a further shot back in sixth position also not out of the tournament.
Five players are at four-under-par including England's Laura Davies, Elizabeth Bennett, Western Australian Whitney Hillier, New South Wales amateur Shelly Shin and France's Joanna Klatten. Klatten fired the low-round of the day a five-under-par 67.
Hedwall got off to a flying start with two birdies and an eagle in her first six holes. She made a superb par saving putt from the fringe of the 18th green to finish her round on a high. She had hit a soft nine iron into the relatively short par 3 finishing hole, the wind got hold of it and carried it long. A duffed pitch shot saw her on the fringe and putting for par, she managed to hole the 27 foot putt.
After her round, she commented about the windy conditions particularly on the back nine.
"The wind really picked up on back nine, it was tough out there, it was hard to get it close to the pins, I'm happy with three under today," said the Swede.
"I hope to win tomorrow but at the same time there are a lot of good players out there and anyone can score low around this golf course. I just enjoy being in contention and being there, as I learn a lot and I'm looking forward to it."
Lee, is in foreign territory as she hasn't been in this position before in a professional event. The 16-year-old hasn't had a bogey in her first two rounds. After her round she said "I made a couple of good par putts throughout my round and that kept me going."
Lurking just one behind is defending champion Ko. She was a little frustrated with her putting today but managed to post a three-under-par 69 to remain in a great position to try and win back-to-back titles.
New South Wales, Sarah Oh, is the only player to have won the Women's NSW Open twice in 2009 and 2010.
Her two appearances have seen the teenage star finish second and first, so that gives her confidence heading into tomorrow's final round.
"Definitely, always feels welcoming this golf course and I have played good here."
"If I get putts rolling I will be able to shot lower scores which I haven't been doing the last two days, but 69-67 is pretty good, it gives me confidence. I have to play my own game as I can't control others."
Another highlight for the round is a hole in one by Elissa Orr, a Victorian rookie on the ALPG Tour on the 12th hole. This is the third hole in one for Orr but her first as a professional.
A total of 61 players will contest the final round after the cut was made at five-over-par.
