ÅÄÖ: what is considered more SEO friendly URL

Question

As far as I can tell I shouldn't be using ÅÄÖ (somthing like they have no visual representation in ASCII??).

So what is considered more SEO friendly? Replacing i.e. all "ä" with "a" or "ae"? (The CMS Umbraco replaces with ae and I'm leaning towards this).

EDIT: Summary of how some Swedish sites does it:

aftonbladet.se/ ä => a (http://www.aftonbladet.se/kropphalsa/)

uppsatser.se/ ä => ä (http://www.uppsatser.se/om/v%C3%A5rd+av/)

lindqvist.com/ ä => a (http://www.lindqvist.com/b/google-maps-placering-ar-gratis)

umbraco CMS sites (like vaxab.se) ä => ae (http://vaxab.se/tjaenster.aspx)

dn.se/ ä => a (http://www.dn.se/sthlm/brak-utanfor-aspuddsbadet-1.1008899)

Answer 1

Here are some of tips.

Answer 2

I'd suggest using the IDNA ToASCII that is the standard for internationalised top-level domains. ICANN have recently approved native-script top level domains using this algorithm, so I'd be surprised if any of the major search engines decided not to support it in future.

http://en.wikipedia.org/wiki/Internationalized%5Fdomain%5Fname

Answer 3

In my opinion, if accented characters has to be retained for their real meaning, then it shouldn't be renamed.

Most case, replacing with the ASCII alphabet cousins should be good. E.g. replacing "résumé" with "resume" makes sense as that's what people search for and understand given the right context.

Else retain accented characters with the URL encoded representation, e.g:
%C5%C4%D6 will be the URL encoded representation for "ÅÄÖ".