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I used to open a file and then when I came to "Save a copy". It would open up at the folder I loaded the file from. Now no matter what I set in File Handling. It opens at Desktop and I have to work my way through the folders till I find the one I want. It does the same when trying to save as well, I am using win11 and latest PS
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I have a slight update to add. I reset options as per an old reply to something similar.
Now when I come to open a file The explorer box opens on the last folder I loaded a file from. But then quickly changes to the Desktop. its as if I quickly clicked on the desktop icon.
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There is a preference checkbox to "save as to original folder". Unchecked, it goes to the last used folder.
If this doesn't work as advertised, try to reset preferences.
If it still doesn't work, that points to a permissions issue in your Windows user account.