How to search and replace utf-8 special characters in Python?

I'm a Python beginner, and I have a utf-8 problem.

I have a utf-8 string and I would like to replace all german umlauts with ASCII replacements (in German, u-umlaut 'ü' may be rewritten as 'ue').

u-umlaut has unicode code point 252, so I tried this:

>>> str = unichr(252) + 'ber'
>>> print repr(str)
u'\xfcber'
>>> print repr(str).replace(unichr(252), 'ue')
u'\xfcber'

I expected the last string to be u'ueber'.

What I ultimately want to do is replace all u-umlauts in a file with 'ue':

import sys
import codecs      
f = codecs.open(sys.argv[1],encoding='utf-8')
for line in f: 
    print repr(line).replace(unichr(252), 'ue')

Thanks for your help! (I'm using Python 2.3.)