South Korean-born, New Zealand-based Ko jumped to an early lead at Royal Canberra with birdies on the 2nd, 4th and 6th holes. She allowed Shin to retake a share of the lead with bogeys on No. 12 and 14 before making another birdie on the final hole to finish 17-under 202.
"When I was coming down the 18th I wasn't pretty happy with what happened, there were a couple more birdie opportunities that I did miss, so I said 'Lydia just have a birdie down the last hole and just be happy with that hole,'" Ko said "I guess it worked, it's quite mentally hurtful when you do make bogeys along the way after you've been playing pretty good."
Two-time British Open winner Shin kept pace, making an eagle out of the green-side bunker on the par-5 6th, but gave up a chance of an outright lead when she had a bogey on the penultimate hole.
"I was too short to watch the eagle," Shin said. "First day and second day I made a good birdie with that hole so I was thinking I had a chance to birdie, but I was surprised it was in."
Beatriz Recari of Spain had a 71 to finish third. Top-ranked Yani Tseng also hit a 71 to finish a stroke back with a group of five players at nine under, along with overnight leader Mariajo Uribe of Colombia who shot a forgettable 79. They were joined by France's Gwladys Nocera, who was the day's best performer with a round of 65.
Stacy Lewis of the United States, the 2012 LPGA Player of the Year, is 10 strokes off the lead after a 69, while four-time tournament champion Karrie Webb also had an improved performance with a 69 to sit another stroke back and seemingly out of contention.
Ko said she was looking forward to the challenge of going head-to-head with Shin in the final round.
"I've seen her play before at the Canadian Open and then on TV," she said. "She's a pretty accurate player off the tee, so in that way we could be pretty similar. She's a great player and there are things that I do need to learn from her."
Shin said the leading pair realistically only have each other to worry about, though the low scoring of the opening three rounds mean a late challenger cannot be ruled out.
"This makes it comfortable for us because we just focus — I just focus about her score and she also just kept looking at my score," Shin said. "But this course has a lot of chance to birdie, a lot of par 5s, so I'm still keep watching for other players. First day Lydia hit a 10 under, I hit an 8 under, so all players had a chance to make the lower scores."
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