My guess would be that the cape could also serve as a form of camouflage; a dirty, ragged piece of clothing is much less conspicuous than his trademark Mandalorian armor, even with the obviously well-known helmet. In particular, his darker color tones would mesh well with a dark location (think the corners of the Mos Eisley cantina, for example.)
Not that Boba Fett really needed to hide, but the element of surprise is always helpful.