Temporary Files While Importing Data In Excel

[acsql2005]

While importing Data from an External Source, does MS-Excel save the Data
temporarily in a File on the Local Hard Disk before finally saving it to the
File we want it to be saved in ? If yes, then some questions :
Where does it Create the Temporary File ?
Can we change the Location of this file so that it doesn't take up space on
the Local Hard Drive ?

If not, how does Excel handle this process ?

The problem we are facing is we are running out of Sapce on our Local Hard
Drive, and we suspect that Excel while Importing Data into it, is the culprit
in creating the temporary files on Local Hard Drive and taking up too much
space.

Thanks,