In your course, go to Gradebook Setup in the Administration Block
Once on the Gradebook Setup page, go to the activity to which you wish to apply the letter scale, and click on "Edit" then choose "Edit settings" from the drop down menu.
This will take you to the settings page for that activity. Click on "Show more" to open out more options
In the opened out settings, open the drop down menu in "Grade display type" to display the grading display options. Select which type of grade (or combination) you wish to display to students and save changes.
Any grading you do for that item will appear in Grader Report in letter format, or a combination of letters and percentages or other combinations depending one which grade display you choose. The illustration is of a Letter (percentage) type that shows a letter grade accompanied by a percentage.