Appreciation of foreign currency refers to an increase in the value of a domestic country's currency relative to other foreign currencies. This means that the domestic currency can buy more units of foreign currency. When a country's currency appreciates, it has several effects on the economy, including its exports.

Increased Competitiveness:
- When a country's currency appreciates, its exports become relatively cheaper for foreign buyers. This is because the domestic currency can buy more units of foreign currency, making the price of domestic goods and services lower in foreign currency terms.
- As a result, foreign buyers are incentivized to purchase more goods and services from the domestic country because they can get more value for their money. This increased competitiveness leads to an increase in exports from the domestic country.

Cost of Production:
- Appreciation of the domestic currency can also reduce the cost of imported inputs and raw materials for domestic producers. This is because foreign inputs become relatively cheaper in domestic currency terms.
- With lower production costs, domestic producers can lower their prices or maintain the same prices while increasing their profit margins. This makes their products more competitive in international markets and leads to an increase in exports.

Demand for Domestic Goods:
- When a country's currency appreciates, it also leads to an increase in the purchasing power of its citizens when buying imported goods and services. This can result in a shift in consumer preferences towards domestically produced goods and services, which now appear relatively cheaper compared to imports.
- As the demand for domestic goods increases, domestic producers are encouraged to increase their production levels to meet the rising demand. This increased production contributes to an increase in exports.

Overall, the appreciation of foreign currency can lead to an increase in exports from the domestic country due to increased competitiveness, lower production costs, and higher demand for domestic goods. It is important to note that while an appreciation of foreign currency generally has a positive effect on exports, other factors such as global economic conditions, trade policies, and the competitiveness of domestic industries also play a significant role in determining a country's export levels.