I have a file with unicode symbols (russian text). When I fix some typo I use git diff --color-words=. to see the changes I\'ve done.
git diff --color-words=.
In case of unicode
The solution for me was to use git difftool.
I wrote this tool https://github.com/chestozo/dmp based on https://code.google.com/p/google-diff-match-patch/.
Sometimes it also gives better diff comparing to git diff --color-words=. :)