The incentives for exports boosts exports for the country. As a result of increase in exports the supply of foreign currency in the country increases. With demand remaining the same this results in a fall in the exchange rate implying currency appreciation. This can be explained diagrammatically as follows,With the rise in exports the supply of foreign currency increases. In the diagram $\mathit{D}\mathit{D}$ and $\mathit{S}\mathit{S}$ are the initial demand curve and supply curve for foreign currency respectively. $\mathit{E}$ is the initial equilibrium point, with $\mathit{O}\mathit{R}$ as the equilibrium exchange rate. Rise in the supply of foreign currency would shift the supply curve from $\mathit{S}\mathit{S}$ to S'S'. With the shift in supply curve, the new equilibrium is established at point ${\mathrm{E}}^{\prime }$, where the exchange rate falls from $\mathit{O}\mathit{R}$ to $\mathit{O}{\mathit{R}}_1$ and the demand and supply of foreign currency rises to $\mathit{O}{\mathit{Q}}_2$. This represents a case of currency appreciation.