If the code compiles (does it?) y must be in scope somehow. It’s
likely defined in some scope that encloses sqrt, or it could be
imported. (There are more possibilities, but they’re even less likely.)
Post the rest of the code; I bet we could find y. Also, this is where
IDEs are helpful: you can click on a symbol and go to its definition.
You have both x and y defined in this line. x is passed as parameter to sqrt, y is an argument to function passed to fixedPoint. Additionally, that function passed to fixedPoint closes over x from sqrt parameters list.