XML file parsed with encoding "ISO-8859-1" but not with "UTF-8"

I am using xerces parser. I could not parse an XML file ( contains some special characters like � ) with encoding "UTF-8" but when i changed it to "ISO-8859-1", its getting parsed.
"UTF-8" encoding is the default encoding type. Also i am under the impression that this encoding will support all the character sets.

Can anyone tell me why this is not getting parsed?

I would like to add some examples to this.

The xml file working with ISO-8859-1.
<?xml version="1.0" encoding="ISO-8859-1"?>
<note>
<from>Ravi</from>
<to>Kumar</to>
<message>Norwegian: ��. French: ��</message>
<body>Norwegian: ��. French: ��</body>
</note>

XML file not working with UTF-8 encoding
<?xml version="1.0" encoding="UTF-8"?>
<note>
<from>Ravi</from>
<to>Kumar</to>
<message>Norwegian: ��. French: ��</message>
<body>Norwegian: ��. French: ��</body>
</note>

So I want to know whether this ISO-8859-1 encoding covers all the character sets available. Can I use this as the default encoding for the XML files used for my application.