And according to this New Year's Carol page, the carol seems to have a long tradition in Wales. The next two paragraphs are quoted from this page:
Trefor Owen describes the context for this song in Wales. Very early on New Year's Day about three or four o'clock in the morning, groups of boys came round to the houses in the neighborhood, carrying a vessel of cold spring water, freshly drawn, and twigs of box, holly, myrtle, rosemary or other evergreens. They sprinkled the hands and face of anyone they met for a copper or two. In every house, each room was sprinkled with New Year's water and the inmates, who were often still in bed, wished a Happy New Year. For this service and wish they were also gifted with coins. The doors of those houses which were closed to them were sprinkled with the water. The verse was sung during the sprinkling.
In certain parts of Wales this custom is called dwr newy (literally, new water). The exact meaning of the phrase, ¡Èlevy dew¡É is unknown, although there have been attempts to trace it to llef I Dduw (Welsh for ¡Ècry of God¡É). This seems to be an imposition of a Christian interpretation on a much older custom. Although the fair maid is now equated with the Virgin, Owen thinks it likely that this custom derives from ¡Èan early well-cult made acceptable to medieval Christianity by its association with the Virgin and perpetuated both by the desire to wish one¡Çs neighbor well at the beginning of a new year and by the small monetary payment involved.¡É