What happens to the exchange rate if the exports of a country fall?

So I am between two answers:

1. The currency depreciates because with a fall in exports, there is a lower demand for the domestic country’s currency. With a lower demand, there is going to be a higher supply. Since the currency is not scarce, the value would drop.

The currency appreciates because with the fall in exports, savings would drop. The savings and investment gap would be wider, suggesting the need to finance this somehow. So, the government can create bonds to finance this. With an increase in borrowing from abroad, the demand for the domestic currency increases, increasing its value.

And this is all assuming the country is a small open economy.

Please help guys, this is one of the questions in my assignment that happens to be worth a big portion of my grade.