Inserting é in psql - invalid byte sequence for encoding "UNICODE": 0xe9

I created a new database with encoding UTF8, connected
using psql, and ensured the client encoding is also
UTF8 (Unicode). But when I try to insert characters
like 'é', I get this error:

ERROR:  invalid byte sequence for encoding "UNICODE":
0xe9

Isn't this possible with psql? Hopefully it's not
necessary to insert with values like  '\xC3\xA1'
instead (which I tried, but the values got inserted as
is and weren't converted).

CSN

__________________________________________________
Do You Yahoo!?
Tired of spam?  Yahoo! Mail has the best spam protection around
http://mail.yahoo.com