Former champion Jelena Ostapenko reached the third round by beating second-seeded Karolina Pliskova 6-4, 6-2.
She is the latest woman with a Grand Slam title or high ranking to withdraw from the tournament that begins next week amid the coronavirus pandemic.
The US was given an early advantage after Australian Open champion Sofia Kenin rolled with a dominant 6-2, 6-2 win over Anastasija Sevastova in the opening match.
It will be world number 10 Kerber's first Grand Slam final since she won the second of her two major titles at the 2016 US Open.
Ostapenko dropped her serve twice before winning a see-saw opening set 6-3 but the Chinese world number 100 bounced back to take the second by the same scoreline.
Julia Gorges also withdrew from the tournament Sunday after winning the ASB Classic final against Caroline Wozniacki in Auckland.
Muguruza is one of seven players who can finish the year on top of the rankings if they lift the season-ending trophy.
Simona Halep called it the best day of her life and targeted a maiden Grand Slam as she surged to number one in the world.