I made two good putts the last two holes; it was already kind of too late."
It means the 18-year-old will almost certainly lose the world No 1 ranking to Inbee Park, who sits in a tie for second on seven-under, one shot behind fellow Korean and world No 3 Sei Young Kim.
Park, who is looking to join Anika Sorenstam to win three consecutive Women's PGA Championship titles, has been hot on the heels of a stangely off-colour Ko for some time and started the tournament only 88 points behind Ko.
Ko is also likely to be overtaken in the earnings stakes. Ko has banked US$942,476 so far this year but Park is not far behind on US$897,500.
Kim has already won twice in her rookie season on the LPGA Tou and shot a bogey-free round to be one shot ahead of Park and Karie Webb.
Suzann Pettersen rallied with seven birdies for the best round of the day at 66 and tied Canadian teenager Brooke Henderson (73) at 6-under. Overnight leader Jenny Shin (75) and third-ranked Stacy Lewis (71) were three shots behind the leader.
Meanwhile, Steven Alker was in third at the halfway point of the St Jude Classic in Memphis on the PGA Tour but might regret three dropped shots in the final two holes of his second round.
The Hamilton professional looked on track to hold a share of the lead after the completion of his second round today but he made a bogey at the par-three eighth hole (his 17th after starting on the back nine) and a double at the par-fourth ninth, which pushed him down the leaderboard.
He eventually signed for a two-under 68, which left him at seven-under for the week and he is still in great shape.
Alker said he picked the wrong club on No 8 where his tee shot landed short of the green leading to his second bogey of the round. Then he put his first three shots on No 9 - his 18th hole - in the rough leading to double bogey.
"It's a good thing it's not Sunday and finish two behind that would be bad," Alker said.
"You have to look at the positives and say, 'I've got two days left.' I've been swinging it pretty good and still learning the putter, so there's a lot of good things going on."
The 43-year-old is two strokes back from leader Brooks Koepka, while American Austin Cook is in second at eight-under after shooting a six-under 64 today.
Alker's first season on the PGA Tour since 2003 has been a struggle but a solid finish this week would push him up the FedEx Cup standings, where he currently sits 183rd, which would help him get more starts as the year progresses.
Manawatu's Tim Wilkinson made the cut in Memphis with another round of 70 today and he is at even par for the week in a share of 53rd. The left-hander began the week in 181st on the FedEx Cup standings.
Danny Lee, who has qualified for next week's US Open and is the best-performed Kiwi on tour this season, has taken this tournament off as he prepares for the major.
