Answer: The correct option is A.
Move toward X but not rotate
Explanation:
This is because from the question, X is fixed and y is free to move. Since magnetic dipole of X is fixed, that is it can't move and that of y is free to move, therefore y will move toward x because it's forces of attraction is linear and not rotational and besides X and Y are on a linear path, therefore Y will move towards X that is fixed and it will not rotate since it's linear.