The binary is invoked with the workspace folder, containing the document to
format, as cwd. So the official documentation, regarding yamlfmt
configuration, applies.
If the file is not opened from a workspace, the extension will fallback to the
files parent directory as cwd. If that is not sufficient to pick up the right
config file, you can create a .yamlfmt at one of the common locations. i.e.
~/config/yamlfmt/ or export XDG_CONFIG_HOME. Alternatively point to the
right at via the -conf flag, in your settings.json.