psql error (encoding related?)

I see this with PostgreSQL 9.4.7 and some 8.x versions running on Linux Red Hat.
Older versions "supposedly" do not exhibit this behavior, but I didn't check.

$ psql
Password:
psql: FATAL: could not access file "\x246c69626469722f757466385f616e645f69736f383835395f31": No such file or directory

The same error is written to the database log:
FATAL: could not access file "\x246c69626469722f757466385f616e645f69736f383835395f31": No such file or directory

This is the environment where this problem was reported
$ locale
LANG=en_US
LC_CTYPE="en_US"
LC_NUMERIC="en_US"
LC_COLLATE="en_US"
. . . . . . . . .

This is the "normal" environment where I don't see any problems launching psql
$ locale
LANG=en_US.UTF-8
LC_CTYPE="en_US.UTF-8"
LC_NUMERIC="en_US.UTF-8"
LC_COLLATE="en_US.UTF-8"
. . . . . . . . .

The database was created using these parameters "initdb -E UTF8 --locale=C -D <data-dir> ... "

When I display the list of databases with \l I see that all of them have these parameters:
Encoding UTF8
Collate C
Ctype C

I can work around this error by doing this "setenv PGCLIENTENCODING UTF-8"

I would like to understand what happens... is this some kind of a bug or just an inherent incompatibility between the client (psql) and the database settings?
Is there a different and maybe a better remedy than using PGCLIENTENCODING?

And if anyone from the Postgres team listening... in the old tradition of whining I would add that the error message referring to a long hex string is not helpful!
Thanks in advance.
Michael.

This email and any attachments are intended solely for the use of the individual or entity to whom it is addressed and may be confidential and/or privileged.

If you are not one of the named recipients or have received this email in error,

(i) you should not read, disclose, or copy it,

(ii) please notify sender of your receipt by reply email and delete this email and all attachments,

(iii) Dassault Systemes does not accept or assume any liability or responsibility for any use of or reliance on this email.

For other languages, go to http://www.3ds.com/terms/email-disclaimer