A.J. Eathorne posted a 6-under-par 66 to stand alone in third place. Kelli Kuehne carded a 5-under-par 67 to share fourth place with Patricia Baxter-Johnson, Nancy Harvey, Siew-Ai Lim and Jill McGill.
Kung had a slow beginning to her round. She notched birdies at the two front- nine par-5s, Nos. 5 and 9, but she started to heat up at the 12th when she dropped a 7-iron within three feet for birdie.
'I started off pretty shaky with my driving,' said Kung, who celebrated her 22nd birthday on Friday. 'I was blocking everything to the right but I was able to keep it in play. I was hitting some pretty good iron shots all day though.'
Kung, who won the Takefuji Classic earlier this year, rolled in a 12-footer for birdie at the par-5 14th to move to 4-under. She knocked a 5-iron to three feet at the next to make it two straight birdies.
The Taiwan native sank another three-footer at the 16th to make it three straight birdies and moved her to 6 under. She rolled in a putt from 12 feet out at the 17th to continue her roll.
Kung capped a sensational run by draining a 10-footer at the last to end her round with five consecutive birdies.
The turning point came when she started to make her putts.
'I just told myself just to get the ball to the hole because I have been playing pretty good the last couple of days,' said Kung. 'My coach came out and we did a couple things and I felt pretty good on my putting. I told myself just trust the line and hit the putt to the hole.'
Dunn played right behind Kung and got a jump on her with a solid front nine. She got on the board with a birdie at the par-4 fifth and followed that up by dropping a 4-iron within 10 feet to set up birdie at the next.
She converted her third birdie at the eighth when she drained an 18-footer. Dunn chipped within inches of the cup at the par-5 ninth to setup another birdie.
Dunn made it three straight when she sank a 10-foot putt at the 10th. She continued to roll as she stuck a sand-wedge four feet from the cup for birdie at the 14th. Dunn completed her scoring by running home a 12-foot birdie putt at the par-3 15th for solo second place.
'I kind of hung around at the end of the front nine and made a couple of putts coming in,' said Dunn. 'I kept it going on the back nine and made a few putts. I didn't make any really big mistakes and played really solid today.'
Hee-Won Han and Catriona Matthew headline a group of six players tied at 4- under-par 68. The other four in that group are Lorie Kane, Nanci Bowen, Jung Yeon Lee and Paula Marti.
Mi-Hyun Kim, the defending champion, is in a large group tied at 1-under-par 71.