Also it's interesting to note that WinSCP can rename folders fine so I guess it can't be a permissions problem:
Creating directory "test".
CWD /user/htdocs/
250 OK. Current directory is /user/htdocs
MKD test
257 "test" : The directory was successfully created
Retrieving directory listing...
TYPE A
200 TYPE is now ASCII
PASV
227 Entering Passive Mode (88,208,218,95,68,133).
LIST -a
150 Accepted data connection
226-Options: -a -l
226 11 matches total
Directory listing successful
Renaming file "test" to "test2".
RNFR /user/htdocs/test
350 RNFR accepted - file exists, ready for destination
RNTO /user/htdocs/test2
250 File successfully renamed or moved
Retrieving directory listing...
TYPE A
200 TYPE is now ASCII
PASV
227 Entering Passive Mode (88,208,218,95,163,228).
LIST -a
150 Accepted data connection
226-Options: -a -l
226 11 matches total
Directory listing successful
Deleting file "test2".
Retrieving directory listing...
CWD /user/htdocs/test2/
250 OK. Current directory is /user/htdocs/test2
PWD
257 "/user/htdocs/test2" is your current location
TYPE A
200 TYPE is now ASCII
PASV
227 Entering Passive Mode (88,208,218,95,7,140).
LIST -a
150 Accepted data connection
226-Options: -a -l
226 2 matches total
Directory listing successful
Synchronizing current directory "/user/htdocs".
CWD /user/htdocs
250 OK. Current directory is /user/htdocs
RMD /user/htdocs/test2/
550 Can't remove directory: No such file or directory
Asking user:
Error deleting file 'test2'. ("Can't remove directory: No such file or directory")