Python supports writing Unicode literals in any encoding, but you have to declare the encoding being used. This is done by including a special comment as either the first or second line of the source file:

  # -*- coding: latin-1 -*-

The syntax is inspired by Emacs’s notation for specifying variables local to a file. Emacs supports many different variables, but Python only supports ‘coding’. The dash-splat-dash symbols indicate to Emacs that the comment is special; they have no significance to Python but are a convention. Python looks for coding: name or coding=name in the comment.

http://docs.python.org/howto/unicode.html

It will also tolerate Vim users:

  # vim: set fileencoding=utf-8 

http://www.python.org/dev/peps/pep-0263/

python specifically looks for that in the first two lines of source (to make allowance for #! stanza on the first line).

See: http://www.python.org/dev/peps/pep-0263/