Diacritical marks are truncated via Active Record

So the diacritical marks truncate the 'name' string when using this db call:

$values['name'] = "Erlösten";
$this->db->insert($this->_table, $values);

And with this db call:

$sql = "UPDATE tblNames SET name='Erlösten' WHERE key = '$key'";
$this->db->query($sql);

But not when I use this db call:

$sql = "UPDATE tblNames SET name='Erlösten' WHERE key = '$key'";
$conn = new mysqli($hostname, $username, $password, $database);
$conn->query($sql);

Any ideas why?
Whether it's UPDATE or INSERT doesn't make a difference. The same result is produced by both in all three cases.