Young babies naturally will have their fists clenched. This is the residual effects of being in the womb. Babies naturally feel more secure when everything is tight and clenched as inside the womb there is not a lot of room.
Being that your little one is 10 weeks old I would say that it will probably only be a matter of weeks before she grows out of the clenching.

It’s called the Palmar Grasp and it’s the reflex responsible for those strong little fist clenches. At about 8 weeks, your baby’s hands are beginning to slowly unfold. He enjoys batting at his mobile and other dangling toys. Give her a rattle to shake–the noise that he creates helps her realize that her hands are attached to herself. At 4 months your baby’s swiping is more purposeful. Her ability to reach is evolving even further as she begins to awkwardly gather toys using a two-handed embrace. She also starts midline play — playing with her hands in front of her body.
So all normal development.
As for the smell, I would just wash it regularly and maybe put some talc powder on it to keep it dry (when the smell is bothering you).

Don’t stress about it. Developmentally this is normal for babies to clench their fists. Just ensure they get a good clean in the bath or with wipes.