Git merge-file doesn't account correctly for not being in repo root

Git merge-file works correctly when reading files, but when trying to
write to them, it doesn't prepend current working directory. I've
attached a basic example - running "git merge-file file1 file file2"
from inside sample dir will "fail" silently and write to file1 in repo
root. Running git merge-file from the same dir referencing files
inside deeper-sample will fail with message "error: Could not open
deeper-sample/file1 for writing".