The fabric was possibly used as a decorative towel to cover washcloths used during a Seder. Decorative towels were a tradition in Alsace, among other places: Alsatian Jews welcomed visitors to a Seder by washing their hands and drying them with a towel that was then used during the reading of the Haggadah. These towels were usually covered with a decorative fabric (see more examples at Yeshiva University Museum, e.g. 2006.231).
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Wall hanging for Passover, Leo Baeck Institute, 61.24.