Você provavelmente precisará traduzir e usar uma boa fonte. Do Manual do Putty :
3.3 Altering your character set configuration
If you find that special characters (accented characters, for example, or line-drawing characters) are not being displayed correctly in your PuTTY session, it may be that PuTTY is interpreting the characters sent by the server according to the wrong _character set_. There are a lot of different character sets available, so it's entirely possible for this to happen. If you click 'Change Settings' and look at the 'Translation' panel, you should see a large number of character sets which you can select, and other related options. Now all you need is to find out which of them you want! (See section 4.10 for more information.)
Na minha versão, na verdade está em "Window- > Translation" e está definido como Use font encoding
Mas há muitas opções no menu suspenso que ajudarão.