Attached patch, issue10329.diff fixes the issue by setting the encoding of the coverage file to that of the source file.  I am not 100% happy with this patch for the following reasons:

1. It opens the source file one more time.  This is probably acceptable because existing code already opens it at least four times when -m (show missing) option is selected.  (Twice in find_executable_linenos() and twice in linecache.getlines().  Fixing that would require refactoring of linecache code.

2. This will not work for source code not stored in a file, but provided by a __loader__.get_source() method.  However it looks like trace will not work at all in this case, so fixing that is a separate issue.