Grateful that you asked this Eternal...I've often wondered, so I looked it up:
"The most commonly repeated story is that the behavior is an evolutionary hold‑over from dogs’ wild ancestors. Circling may have been necessary to trample down tall vegetation and shoo away any pests hiding in the grass, making the ground more comfortable to lie on.
Others theorize that dogs in the wild preferred to sleep with their nose into the wind. Circling allowed dogs to determine wind direction. The simplest explanation is that turning in circles is just a way to orient the body into a tight curled posture as the dog lies down."
Hmmm.
Love V xx