The question is how \xc3\xa4 is actually represented in your file.

If you write qq|\xc3\xa4|, then Perl interprets the eight characters as two bytes with the hexadecimal values of c3 and a4, respectively. But if you read \xc3\xa4 from a file, this interpretation doesn't take place: These are eight individual ASCII characters. What you can do, of course, is do the interpretation yourself:

use Encode;
my $ucode = q/\xc3\xa4/; # note the use of 'q', not 'qq'
my $newcode = decode('utf8',$ucode =~ s/\\x([a-fA-F0-9]{2})/chr hex($1
+)/egr);
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