The Wicklow man posted a second consecutive under-par round and is just one shot off the lead, held by a group of nine players.
Dunne shot a five-under par 67 and repeated the feat yesterday with a blast of late birdies to stand at seven under.
Dunne played the front nine in level par, posting nine straight pars. Dunne then then went on the attack and snatched birdies on the 10th and 11th. However, he dropped two shots on the 12th and 13th to return to level par for the day.
But he turned things around when bagging a birdie on the par-four 16th and finished off in style with another birdie on the par-five 18th hole.
Graeme McDowell had a disappointing second round and despite starting with two birdies, he struggled in the windy conditions and eventually posted a three-over 75.
He now sits five shots off the lead heading into the weekend.
Overnight leader Bradley Dredge could only add a 72 to his opening 64 and was joined on eight under par by Andy Sullivan, Kiradech Aphibarnrat, Nacho Elvira, Jorge Campillo, Thomas Aiken, Jaco van Zyl, Wang Jeunghun and Mikko Korhonen.
The previous record for the most players tied for the halfway lead on the European Tour was eight in the Scandinavian Masters in 1997.
Sullivan started his round from the 10th with 10 straight pars before four birdies in the last eight holes gave the Ryder Cup player a second consecutive flawless 68.
“It was a frustrating start to the day,” Sullivan said: “I thought my first nine was the one you could really get going on and platform into the back nine, but it didn’t really happen.
“I just did not convert the putts but my caddie told me just to be patient on this nine and finally the putts started to drop. All in all I’m reasonably happy, just feel going into the weekend need to improve on the par-five scoring.”
Fellow Englishman Jordan Smith was among seven players just a shot off the lead after continuing an impressive start to his debut season with five birdies and an eagle in his 66, the joint-lowest score of the day.
“I’m over the moon,” the 24-year-old said.
“It was difficult with the wind really picking up in the afternoon and I hit some awesome iron shots out there. Really happy with the way I played.”
Smith finished third in the South African Open earlier this month after playing in the last group in the final round with Rory McIlroy and eventual winner Graeme Storm.
Four-time major winner Ernie Els was two shots off the lead after a second round of 70, but former US Open champion Graeme McDowell could only add a 75 to his opening 66 to finish one shot inside the cut on three under.