The api was invoked by a user 'qlikadmin' who is an administrator on the windows box and is also a RootAdmin for the Qlik Sense Server.
The folder dataconnection gets created and I can see it in QMC.
I modified the "FolderDataConnection" security rule so that the Context is both qmc and hub. And based on the security rule, qlikadmin has access to Create/Update/Read/Delete folder in both hub and qmc.
But when the same user (qlikadmin) tries to create an App and uses the "Data Load Editor" he does not see the folder "My Config" available (in the list of Data Connections in the right panel).