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Preview File location is determined in the overall Project Settings.
Set this location before you render any Preview Files.
Project > Project Settings > Scratch Disks...
Some documentation regarding the Scratch Disk location is buried here:
If I select the Use Previews option when exporting, aren't I degrading the quality of the export by encoding from an already encoded preview?
In most (if not all) cases... yes.
Previews are intended for real-time playback in the Timeline only.
You should not use previews for export.*
For the absolute best quality, should Use Previews be turned off?
*There are a few semi-obscure exceptions to this general rule.
Thanks for the info. The Premiere manual sure needs some work.