This is part of broader issues/not yet implemented features around relative links (especially important with standard markdown links in relative path mode).
In relative path mode, always add ./ in front of links for files in subdirectories relative to the current file and ../ for files in subdirectories above the current file.
This is particularly important since Obsidian doesn’t use a front / in absolute path mode and this creates confusion and ambiguity.
In Relative-path mode,
relative links should be updated when:
a linked file is moved (done!)
AND
a note that contains the link is moved (to-do!).
EDIT: Added minimal example:
Have foo.md and bar.md in the root of the vault.
With foo.md containing [[bar]]
move foo.md to /subdir
Expected foo.md content:
[[../bar]]
Actual
[[bar]]
Same problem applies to standard markdown links.
Also we don’t support filepaths with # in links.