Can you share the file? *Document → Set Encoding → Unicode → UTF-8* *should* change that to well, UTF-8. Make sure *Document → Write Unicode BOM* is *not* checked as well, that could confuse tools.

I expected

Document → Set Filetype → Scripting Languages → Shell script

to set encoding according to the Filetype intent.

It's unrelated, nothing prevents you from saving something you display as shell script in UTF-32 or anything else. And actually, not only preventing that could prevent legitimate use case, but it'd also be terribly tricky, because there's a very large variety of encoding that offer enough similarities so that they work, yet some don't. OK, UTF-16 and 32 have against them they obviously aren't ASCII-compatible, so anything that don't understand encoding but expect ASCII will not like it, but some odd 7 or 8 bit encodings are not ASCII compatible in ways that do or don't affect specific compilers, interpreters or other tools. Bottom line is, encodings are complicated, and support for each en every one of them varies wildly depending on way too many parameters specific to a use case. Yet usually, using BOM-less UTF-8 is pretty safe nowadays. But sometimes another encoding might actually not be an error (as a matter of opinion though).

It does make sense to segregate file types and encoding.

Besides `filestype.sh` could possibly be used to set a default encoding, either that or create a template.