The drubbing delivered to the dollar on foreign exchange markets over recent months obscures the fact that global demand for U.S. currency, in its elemental form of cash, has been growing at a strong rate.

According to data from Wrightson ICAP, the most recent four-week moving average for currency in circulation grew at a robust 10.3% annualized pace.

That figure was no doubt boosted by holiday shoppers withdrawing money from cash machines, but it’s still well above the 2% growth rate posted in the same period a year ago. And average monthly currency growth year-to-date stands at around 5%, according to data from the Federal Reserve, well above the 0.1% pace that persisted before the financial crisis. Latest data reported some $978 billion in circulation at the start of the month, up from $750 billion at the end of 2007.

The world-wide interest in holding cold, hard dollars is driven substantially by fear. The surging demand for cash has happened despite broad worries about the dollar’s value at a time of U.S. economic malaise and radical monetary-easing measures by the Fed. The cash surge is largely separate from the central bank’s liquidity providing market interventions. Demand for cash has increased even as the dollar has had a rough few months relative to other major currencies, and as some investors have flooded into gold out of fear that the greenback will lose its value.

While the financial system’s is healthier than it was during the darkest days of the financial crisis, a sense of unease persists in many quarters. Many still worry about newfound trouble in banks. The broiling European debt crisis, which raises questions about the future of the euro, the dollar’s chief rival, also makes paper dollars more attractive to a wide range of prospective holders, many of whom are outside of the U.S.

The dollar’s slide against its major counterparts in the first half of the fall abated in November. Gains this week are in part driven by optimism that an expected extension of U.S. tax cuts could help the U.S. economy. Before the dollar reacted negatively to the Fed’s bond buying program, the currency had been seeing strength over the summer amid investor fear related to the euro zone’s sovereign debt crisis.

But where ever the dollar’s broader value has been, demand for cash has been robust and akin to the fear-driven purchases of gold and other conservative strategies favored by those who say the Federal Reserve bond-buying program will eventually cause inflation to eat into the dollar’s value.

Gauging currency-in-circulation levels and demand for cash is a tricky affair, muddled substantially by how much American paper money is outside the country–some $366 billion in cash, according to central bank data from the second quarter.

The dollar is often king in nations with troubled or historically dysfunctional domestic economies, like certain South American nations and in many of the nations that comprised the Soviet Union. Some of the cash is used by those involved in illegal activities.

The prominent role of foreigners in driving currency growth shows that even if many investors have questions about the dollar, plenty of folks see U.S. cash as a rival to gold as a store of value.

The majority of outstanding cash is made up of $100 bills, the largest size note in regular production. That denomination is attractive to foreigners who hold dollars in cash in lieu of bank deposits.

The bill’s importance in international business is such that in the late 1990s, congress held a hearing wondering whether the then-imminent launch of the 500-euro note would pose a threat to the dollar’s overseas prominence. Some legislators feared the simpler logistics of carting around the biggest euro note relative to the dollar would erode the dollar’s top status, a fear that never in fact materialized.

Patterns in the demand for currency even drove the government to increase its production order for the $100 bills by 44% in the 2010 fiscal year, from its estimated 2009 purchase order. Other evidence points to very strong demand for $100 bills this year as well, in large part from overseas holders.