\listfiles
\documentclass{book}

\usepackage[ps2pdf]{hyperref} % then try again without this line

\usepackage[all,ps,dvips]{xy}
\UseTips

\begin{document}

\SelectTips{xy}{10}
\begin{graph} x : [r] y \end{graph}

\SelectTips{cm}{10}
\begin{graph} x : [r] y \end{graph}

\end{document}