Can anyone explain this behavior? Compile this:
\documentclass{article}
\pdfoutput1
\usepackage[all]{xy}
\begin{document}
$$ \xy
\POS(0,0)*+!!<0ex,0ex>{A}\ar^{f}(20,20)*+!!<0ex,0ex>{B}{}
\POS(0,0)*+!!<0ex,0ex>{A}\ar^{f}(20,20)*+!!<0ex,0ex>{B}
\endxy $$
This doesn't happen if you remove the pair of braces at the end of the
first line.
\end{document}