The New Zealander, 19, is one shot behind joint leaders Brooke Henderson and Lee Mi-rim after two rounds at the Sahalee Country Club, Seattle.
Canadian Henderson, who led after round one, hit a two-over 73, while South Korean Lee had a 69 to reach two under.
Scotland's Catriona Matthew is three behind on one over par after a 67.
Matthew's three-under score was the lowest of the round on a tough scoring day, on which early sunshine gave way to cool temperatures and rain.
Only five players are under par at the halfway stage of the second women's major of the year with Americans Gerina Piller (69) and Brittany Lincicome (70) joining Ko on one under.
Ko, who won the ANA Inspiration in March to add to her victory in the Evian Championship last September, said: "If it wasn't for my putter I know I wouldn't be in this position."
Henderson, 18, said she was "happy" despite dropping a shot at the 18th to lose the outright lead.
"It was a tough day and the conditions made it difficult, I hung in there," she added.
World number one Lydia Ko hit a one-under-par 70 to remain in contention to win her third consecutive women's major at the Women's PGA Championship.