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After a new installation of Redhat 6.0 less won't display latin1 characters correctly, although I chose a latin1 keyboard in setup. Solution is to set env. variable LESSCHARSET=latin1
This is because you are not in a latin1 locale. For instance, if you set your LANG environment variable to en_US, and then try to view a file with latin1 characters, you will have no problems. You are by default in the "C" locale, i.e. ASCII.